Asked on 26 Feb 2020
Hold or sell in hopes of buying cheaper?
I am a long term investor and would have already do my due diligence for that particular stock I am buying. So it does not matter when the prices start dropping. I will just hold to it, ignore the market reaction and just wait for the value to raise.
Of course, I will also sort of bang my head against the wall asking myself why I never wait for 1 or 2 more days so that I can buy it cheaper.
Thats where people recommend to use DCA method.
If you have this concern, then better way should not be lump sum but using DCA method and you don't have to worry about the dip. As the market dip more, you get the chance to purchase at lower price.
If you are sure that the companies you have bought are fundamentally strong companies with a strong management team, then you should average down and buy when the stock dips further, so when it rebounds you will be sitting on a large captial gain and the dividends that was paid out.
All this starts with a prudent stock selection in the first place
when you're 100% convinced that it is an at least decent stock,
you should hold it. particularly when you speak of the current Corona Dip.
Though there still can be grave global repercussions, I feel despite of all the tragedy,
after at max 1 year all difficulties are overcome.
Though I hold single stocks myself, I am convinced today
diversified passive indexing ETFs are the better alternative
(i also follow - mainly - the latter strategy myself)
Go back to your investment objective. If the objective is to hold for the long term, then do it.
If the strategy is to do dollar cost averaging, then follow suit since that is the strategy to achieve your objective. In case you are wondering, I wrote an article on how well dollar cost averaging works in a downward market: https://www.blog.pzl.sg/dollar-cost-averaging-singapore-does-it-really-work/
All in all, always have a well-defined investment objective before starting to invest. Otherwise, crisis will cause chaos for you!
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