“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch
If you are investing in the stock market, one thing you must know is that there’s always going to be a decline at some point. The exact time it will happen and the magnitude, no one knows. If you aren’t able to deal with that, you should reconsider your decision to invest in stocks.
The way the market works is such that every bear market is always soon followed by a bull market. And even the strongest bull runs would have spells of panic moments that could derail it, sometimes there’s something to be worried about but often the market just shrugs it off and the bull market continues its run.
However, most investors tend not to have the ability to stomach this volatility. Hence, they sell out of their positions much too quickly, whizzing in and out of the market to the detriment of the investment returns. And the reason is quite simple, in a market correction, where stocks can dip 10-15%, watching your 10 million Naira portfolio drop to 8.5 million Naira, isn’t the easiest thing to do. The instinct tends to be save what you can save and run.
However, those who invest regularly in a well-diversified portfolio with the right shares and held on to their investments patiently through the market swings have seen their portfolios perform quite well.
Based on the foregoing, you would see that your investment operation would fare better if you are able to hold your nerves and keep your stocks with a long-term outlook.