The past few months has been either a great bargain or a disaster to many of our portfolios. Prior to my absence, I wrote about how we should buy back as the market retreats. We saw extremely good opportunities to purchase stocks at a great price but at that time, the buying volume has been significantly lower as fear peaked. Right now the market has reverted to a more stable state knowing that inflation is not going to last forever and that shortlists are also losing confidence in their positions. That is not to say that the market will not dive once again. Rather, we should again spend some time to take stock of what we might have done not so right in the past months and see if there is a way for us to learn from those experience. In this post, I will share my personal experiences as I navigate through the market sell off.

Buying and holding is a terrible way to navigate through a crisis

The main pains of an investor is that our portfolios are too complex to sell away even when we know that the market is going to crash. The reason is simple, it is because we have too many entry prices and those prices are all, if not most, higher than the “current” price. Though all signals points towards a further dive, there is little to no incentive for investors to sell first at those points. Therefore, the lesson learnt is if you want to be a buy and hold investor, be prepared to feel awful if you want to buy stocks with a hands off approach in mind.

No investing strategies will work well in a market sell off

Well, it goes without saying that shortists will disagree with this point but the main point I am trying to make is with investing rather than trading. This might sound contradictory as I too will sell first and buy back at times. That said, I do not support pure short positions as well as option traders that siphons from the market without holding the actual assets in the first place. Legitimate strategies include, range trading, dividend investing and dollar cost averaging. These strategies will all lead to one outcome, more capital deployed and increasing losses during that period of time. Does that mean we should not do anything during a market sell off? My best advice and personal choice is to increase the price interval by a factor of 2 which means that if you previously bought at every 10 cents interval, try pushing it to 30 cents instead.

Make sure you have sufficient capital if you want to be an investor

Terrible title I understand but I cannot be more clearer than this. Being an investor is expensive and the gains we make are always only a fraction of what we have put in the market. Do not be deceived by people who show off their double or even triple digit returns in a single transaction. Those people are hiding their losses in other transactions and are not being honest most of the time about their portfolio performances. When the market is down, there is less and less capital left to invest further hence we must really take a step back to evaluate how much you are willing to lose rather than make if you want to survive every major dip.

Closing thoughts

It is great to be back and writing after 2 months of absence, I believe this break from my blog has given me time to ponder more about the meaning of investing and how it has made me into a better or worse person. Even though I consider myself to be quite tough, I still fell hard from time to time but thankfully, with the support and help from the right people, I held on and now that I am back, I am back with a whole new understanding and am more prepared to overcome future challenges.