Hi, so my question is I know everyone batters on about long term holds, donāt sell donāt sell BUT my question isā¦
If we know we will be having a recession for example which was forecasted a long time ago, if people have big gains already isnāt it better to sell take the profit, keep back the inital stock price buy in, wait for the decline from the recession and buy back in low?
Then when it raises you have gained profit and bought back low as well with the original value so then made more profit when the stock recovers to where it was pre recession?
Am I getting this all wrong or what? I just see it as if someone was to hold and let their shares dip right down with the recession all that achieved was nothing as they then need to wait for the dip to recover and when it does they will be right back where they started.
Just wondering if Iām going at this the wrong way? I get the full diversity of a portfolio and that when some stocks are down others take the weight etc but why should they when you can take advantage?
Yes, itās wrong. If a recession is forecast for a long time, it will already be priced into the stockās current price. You wouldnāt gain anything from selling. On the contrary, since itās already in the price, you will likely miss a recovery and miss out on returns.
Generally, stock prices tend to increase in a recession because of this effect.
Nobody can predict stock or market movements in the short term or medium term. This means you can never actually predict anything, the only thing youāre doing is fooling yourself into believing you are special for some reason and can do what no one else can do.
Time in the market, donāt try to time the market. As hazed has said, you can think youāve got the timing right by selling and then end up kicking yourself. Unfortunately, Iāve not been immune from learning that lesson the hard way myself!
I think Adam Khoo over on YouTube said something about this not long ago.
People who jump in and out of the market when it goes down and up end up with lower returns than those that hold and stay invested in the long term
I would have the mindset to always protect your profits. Long holds pay off but a long hold doesnāt mean you need to keep 100% of your investment in a stock to have a ālong holdā. Aiming for a 400% (arbitrary) return on a long hold is great if it happens, but you need to take some profits along the way in case it doesnāt. Investing isnāt only about the buying plan, you need a realistic selling plan as well.
Itās incredibly tricky (and stressful) to time where the bottom is. You could buy when the stock is 25% down and it could fall another 25%. If you are confident the stock or market is going to fall then you could use a hedge in the short term but this still presents the risk and stress of market timing.
It all depends on your time horizon and portfolio composition. I can only talk as primarily an index investor where I will look back in 20 years and see any bear market as a blip.
I donāt know the share price but the interest rates increase is designed to make a recession and in dark times with less money in the market you can put two and two together.
Cheers, yeah mostly what I meant was big events like covid lock downs, recessions I thought were slightly more predictable than just jumping in and out the market as I also seen videos about how this works out bad.
As always it will depend a lot on the individual stock. Cyclical stocks may. Or be expected to fare so well in a recession. Out of my portfolio of ~24 equities thereās probably only one Iād consider getting out of going into recession.
I personally have done this and got lucky. It ultimately depends on your judgement of value as there is no sure way of knowing matkets. I believe thatās why wisdom says buy and hold for years as it almost negates short term losses and markets have historically gained and surpassed those crashes.
Selling one holding at a profit to buy into another is a different story
