When the stock market crashes, is it better to sell stocks or buy more? - Seedly

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Asked by Anonymous

Asked on 11 Mar 2019

When the stock market crashes, is it better to sell stocks or buy more?

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Thanh Dat
Thanh Dat
Level 3. Wonderkid
Answered on 26 Mar 2019

Hi members,

If the stock market crashes, we will never know when will it be the lower points before we buy. What happens when the moments we brought it..it continues to drop. That's the worst case scenario. Last week I brought 1000 koufu shares at 0.735. At this current time koufu was sitting at 0.775. It will be kind of scary if it turn out to be the other way. This coming May koufu is paying a dividend of 0.012.

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Richard Woon Tian Jun
Richard Woon Tian Jun
Level 6. Master
Answered on 24 Mar 2019

When the market crashes, assuming you aren't exactly holding on to any stocks per se, it is a good time to buy into all the undervalued stocks that investors panic sold out of. A stock market crash usually is due to a negative spiralling cycle of panic selling and self fulfilling prophecy, so usually the bottom of the stock market will allow you to reap alot of gains IF you are able to pick out the right stocks that will rebound back. These stocks are firms that show - strong fundamentals, good management and guidance, sustainable business model, strong outlook towards growth and expansion.

Recessions are bound to happen. It is those that can tough out the rough ride that emerge the greatest victors.

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Isaac Chan
Isaac Chan, Business at NUS
Level 8. Wizard
Updated on 12 Mar 2019

I guess you can both sell and buy stocks, but the real question would probably be which one to buy and sell.

When the market crashes, it gives you an opportunity to buy stocks more cheaply. The negative sentiment cause people to believe that a stock is less valuable than it actually is. So when the market corrects or recovers, you can make a profit out of selling it.

On the other hand, some stocks could have been overvalued for a long time and the market may be correcting this overvaluation, so it may not make much of a sense to buy them straight.

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Yong Kah Hwee
Yong Kah Hwee
Level 6. Master
Answered on 12 Mar 2019

Would you buy, say, clothes at a discount or when they are at their highest price?

Same thing for stocks, it is better to buy more when they are on 'discount'. Make sure you do your own due diligence before investing, and not just invest in any company that is on discount.

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Terence Tan
Terence Tan, Finance at Singapore Management University
Level 3. Wonderkid
Answered on 12 Mar 2019

If your investment thesis remains the same and the company is still on track, then buy more.

But then, if stock market crashes, then you sell, isn't it related to buy high sell low?

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It is better to buy more since the stocks are getting cheaper. Unless you can sell your stocks right before it crash, you should not sell them. Dont buy everything when it starts dropping though. Like if you have a warchest for market crash, use 50% if it drops by 50%, use another 25% if it drop to 60%.

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