When the stock market drops sharply, do not sell your stocks (if you have invested in cash and are not on margin). The stock prices are undervalued. They will rebound when the squeezed investors have sold their stocks.
Here is an explanation that I gave a few weeks ago.I have invested in cash, so I do not sell at the depressed prices.
Instead, I have some spare cash that I will invest in this bear market. But I will choose the stocks that are undervalued.
I will not choose the US stocks that have PE ratios above 20 times.
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2 comments:
It's the same with your property. As long as you are able to hold & service your home, will you sell just because property market crashed & your latest property valuation has dropped -10% or -20%?
Be glad that property market is much less transparent & much slower moving then stock market, else we will see a lot of panic selling & panic buying in properties, just like stocks.
As for stocks, if you're holding large diversified index funds / ETFs, just hang on & continue to DCA monthly or quarterly.
If you're holding individual stocks, sell those hyped-up growth companies with no profits, no free cashflow, and/or weak balance sheets.
This is my 4th US bear market & the 6th time when stocks dropped at least -19%. Numbed & no feeling liao. After each crash & after each bear market, my portfolio comes back bigger & bigger.
And I retired 14 years ago with no more salary or rental income.
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