Timely question to be pondered over by every investor no? Good time for an honest, no hold barred exercise before the year is out and a new 12 months cometh. Agree?
As a singular retail investor in a sea of investors comprising of individuals (like me), funds houses, financial institutions, private equity firms, family Investment etc.. everyone is trying to make sense of how to navigate the complex and emotionally charged market, especially now more than ever.
Below pointers are hindsights / knowledge that I have gathered thru experiences, observations and sharings with peers. Hope they benefit those reading this, especially newbies who may be overwhelmed. I know I was when I stumbled in knowingly; yet not really knowing in actuality.
1. Do not panic. Is this important ?
It is because :
(a) it could have been the widely practised manipulation by the bigger boys attempting to inject just the right amount of fear; causing everyone to flee and in the process created the opportunity for them to pick up bargains after everyone have left.
Do you recall how the WSB individual investors who managed to teach these veterans a lesson; albeit an expensive one ? However did Wall St experts learn their lessons ? Of course not... LOL.
(b) it might also be a knee jerk reaction by investors who haven't thought thru carefully. Many a times when a news broke out, the effect will not be felt in the immediate future but somewhere down the road. The stock in question may still be profitable. Also, the reported obstacle could be resolved too before the effects set in.
In this respect, is panic necessary ? No right !
2. Don't take too long a time to react. Is this contradicting above #1. Not necessary.
If a crash occurs, while careful assessment is necessary, procrastination is not. Take too many minutes to come around might result in "too late to abandon ship".
Implicitly, you need to know your holdings well. That is which stock/s is/are in the green and by what percentage margin ?
Just so that you could quickly cash out the stock/s first and lock in the biggest profit first, no ?
This also imply during "peace time", regular review and re-balance of portfolio is the order of the day. A concise "profitable" portfolio further facilitates cash out when required. Agree ?
3. In the event that its too "late" to leave, plan-B would be :
a. wait for the dust to settle
b. when price/s becomes more "stable"
c. add to your existing portfolio
d. create a new & small position of a new stock to your portfolio.
According to veteran investors, never plunge headlong with all resources because a stock looks "cheap". In the market, "there is room for it to be even cheaper".
4. Finally, there is never a better time to re-group. Use the quiet time to get up to speed to see what is happening the world over. It will come in handy when there is an opportunity to cash out OR further add to your holdings at the "right" price.
My take. If I have missed out other salient pointer/s - pls feel free to add on in the Comments section ok. Together we could have a holistic article that is beneficial for anyone interested.
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Food for thought..