Stay the Course
The market is volatile in the past week or so. A few not so good news and data scared folks: Last Wednesday, manufacturing data were disappointing; on Friday, the jobless claim was higher than expected. These news sent the major indexes to red zone (S&P 500 dropped over 4% in 3 days and Nasdaq even more). Then over the weekend, Japan raised its benchmark interest to 0.25% from 0%, sending its market plummet by 12% overnight. In the U.S., the sentiment was “sell, sell, sell”, pushing the indexes sharply lower. S&P500 dropping another 2% and Dow Jones slides over 1000 points. Should you sell at this time?
If we look back at each crash of the stock market in U.S. history. The market panic in 1929, 1987 and 2008 caused massive selling. However, did you know that after the worst day of stock market crash on Oct. 19, 1987, the market recovers in less than one year and reach its all-time high. If you panic and escape the market, you are not only taking the loss, you will miss the market gain afterwards. So the best choice is to stay the course. You may wonder: What does that mean?
It means, keep buying the stocks you love. If you love NVIDIA (ticker NVDA) at $140 per share, you should love it even more at $100. The stock market is giving you a great discount for buying a premium business, so why shy away or scared? Just. keep. buying. Like Nick Magguilli said in his book Just Keep Buying. In good time and in bad time.
The best strategy is to always have some cash aside so you can keep buying when the market offers steep discount. Warren Buffet, the oracle of Omaha, shared his investment wisdom: Be patient and wait for the opportunity to buy a great business at great discount. Just like in a baseball game, swing your bat in full force at the right opportunity. Many stocks doubled after sharp drop at news of pandemic when Covid broke out and the spread was out of control. You may be tempted to sell. If you did, you would certainly have missed the 100% gain for the stock of some of the most valuable companies such as Amazon (AMZN). So the best strategy and advice for investment from the investment masters are: Stay your course and just keep buying. You will see the rainbow after the storm
