Was kinda busy this week preparing for my short trip to the Philippines to renew my CPA license and cant help to notice that the Stock Market, yes the whole wide world stock market, is in red.
So a question what should I do in such situation?
Well all I can do is share my past experience.... so don't follow every advice I dispense in this post because it might not be right one for you.
Yes I remember the days when I was a very "newbie" guy in this game. I always check my stock portfolio everyday in a normal day, and every hour in a red day. I am really fearful my stock's value starts to go down in specially when it hits my psychological stop at -5%.
Imagine how I look, totally focus on the screen with multiple open windows and shaking. I thought I ddid something wrong or I made a bad stock purchase and of course I thought I was losing money big time.
Well I was wrong. I sold the stock and after a week or two its price jump back 15-20% thus I lost the chance to actually earn 10-15%.
Well this strategy is okay only if you are accumulating.
But if you intend to sell your positions because you have an expense coming I guess you will miss your target. You see the purpose of cost averaging is to spread your cost over time. Thus if your goals are short term you wont make it.
It is good to cost average but always look at your time horizon, you might end up waiting in vain and regretful when the stock's performance is stagnant for a long time like what I did with my AC(Ayala Corp.).
I waited nearly a year and a half but nothing happened. I cost average from time to time until my position was nearly 100,000 pesos. When the stock's price went up by about 3-5% I sold it right away.
In the next few weeks AC's stock price went up further and boy I was regretful again. I didn't have the patience to wait further thus missed a great opportunity.
Do nothing for now
Yes another thing to do when the stock market is red is to do nothing until a signal that a reversal is coming. I guess this is the wisest I did.
So right now I am waiting for the market to reach rock bottom before actually going into a buying spree. But if you have cash and feel like shopping it is good to start choosing now and time at the best price the stock has to offer.
What do you think we should do on a Red Stock Market? Share your thoughts in the comment box.