Do You Sell Shares or Stocks in Panic?
Stocks often tend to crash as they often rally. Some investors lose control when their start tumbling down. Then sell in panic. Do not do that. Here is why.
Even when stock market legends like Warren Buffet or Benjamin Graham told not to sell in panic many will sell in panic. It is not easy to understand the situation one will be in when one’s stocks start tumbling down. It is easy to say not to sell in panic. But it is tough to control ourselves in that situation. So we need to know the strong reasons to not to sell like that.
Stocks slide because…
When stocks slide it means something went wrong with bulls. And bears have taken over. These are stock market terms. In simple terms, investors who buy for the long term have stopped buying but many investors started selling stocks either due to fear or to book some profits. There are many clear reasons why stocks are falling. One is for example, inflation is at a high rate or the stocks are overbought. It means that after some time they will come into control and stocks will stop falling. So it is better to assess the extent of problem before selling in panic. Sell it if you are the first to sell but not after many have started selling.
Why you should not sell
Depending on the problem you can wait for the time or sell immediately before many investors sell. Selling in panic happens rapidly. So even if you decide to sell before anyone does, there is less time for that. So it is not advisable. Rather be prepared to add some money to average the bought price.
One thing that consistently happens when a stock slides is its retracement or rebounce.
If a stock is just consolidating gains it will rebounce. This is when people sell in panic and burn their fingers only to see the stock recover quickly.
When stock is falling due to strong fundamental reasons and it will take while before things get corrected, there is a consistent chance for retracement over time repeatedly. So if you decide to sell wait for retracement and sell to reduce the losses to some extent. If you have bought before upward retracement then you can eliminate losses or even make profits. But if only you sell otherwise the stock will again fall for some more time. Then you have to wait for a long time to relish the gains.
In fact, what happens in the market is that those who have waited all the time and even more time for it to reverse up make more money than anybody else. Those who wait for some time only to lose control and sell sadly definitely make big mistake. Because the accumulated sentiment that they get will be detrimental for their investment decisions in the future. Those who sell during retracement generally tend to neglect that stock when it reverse due to good fundamentals. They lose the rally.
Conclusion
Stocks have retracements and rebounds. So never sell in panic or during stock sliding. Even central banks take care of that to control investor sentiment. Follow proven strategy of averaging the stock price to reduce the bought price and waiting for its fundamentals to correct. You will be glad you did this when you realize what would have happened otherwise.
