Lots of things has happened in the past 1 week of February:
- Falcon Heavy was successfully lifted to the space – starman and the Tesla Roadster is traveling lonely in space listening to Prince’s Space Odyssey
- Twitter became profitable (finally!)
- 10-Year Yield rose to 2.85%
- XIV was “terminated” by crude hands of Credit Suisse
- Oh, Equity markets were sold off about 10% or so
For one day, around lunch time, I received some inbound inquiries about what should we do. Based on my over 15 years of experiences in equity markets below is a list of Don’ts
- Don’t sell your positions (lock your computer, grab a drink, buy a ice-cream, listen to some music. Just don’t log into your brokerage account)
- Don’t get stressed out (unless you have high portfolio margin, which you should not have done anyway, however, if you do, and the account is close to being margin-called, and if you think you have money to save it, it won’t be a bad idea to pump some spare cash into that account to avoid a forced liquidation) – one thing worse than watching a stock market falling, is that you are forced to sell your positions into the slump.
- For 99% of the people out there, don’t try to buy in such market. Unless you have done your detailed homework and know what price level makes the purchase a great bargain, chances are the stocks valuations after such a long bull market climb are not considered “cheap” even after a steep sell-off. Again, if you are not sure, hold you cash and take a hike (or take a nap).
Follow the above three rules, you will come to thank me later when market rebounds.
One extra tip: for inexperienced investors however, who wanted to select individual stocks, one quick tip never going to hurt is to religiously follow two rules:
- never buy in a up market
- never sell in a down market
even it is one day difference. you may emotionally survive better. But it is not a sufficient condition (also not a necessary condition) for a successful stock picking operation. (but it helps).
Good luck everyone. And this sell-off is not over.
(by the way, we liquidated about 25% of our position in January, so we are holding 25% cash going through our valuation models to find which one to load up from the wreckage =)).