My Stocks are Losing Money…Should I Sell It? ( 5 Implications to Invest Under the Threat of Coronavirus COVID-19)

It doesn’t feel good — seeing your hard-earned and hard-saved money evaporates in the stock market. I have been there, I understand how that feels. Seeing the red numbers falling is like losing blood from the body. And there is nothing you can do to help except to watch it fall…and fall…feels helpless, scared, anxious, worried, angry, frustrated, regret, guilt, and any other negative feelings you can think of.

You are so tempted to sell to cut loss now. You want your money back so that you can escape from this crisis. But by selling at this point, you are acting contrary to the investment wisdom of “buy low and sell high”, and “be greedy when everyone else is scared”. Logically, you know this is not the right thing to do because by selling your stocks now, you are realizing your losses — your losses on paper would become real and set in stone.

If you are thinking of selling now, and wait for it to hit bottom to buy and sell when it gets back up — this is theoretically right. The question is we do not know when it will hit bottom.

When you get in at a certain point, you never know if it is ‘low enough’. It could get lower. It could still continue to fall and go down. And you could suffer from further losses. And you have to take into account the human factor as well — when the market is really low, would you have the courage to buy (seeing all the red numbers)?

And after you do so, would you still have the mood to work or do other things except to keep watching and tracking the stock market?

Let’s go back to square one. We know from day one that volatility is the nature of stock market. And because of this volatility and market inefficiency, we have the opportunity to profit and earn money (or loss money).

2000–2002 the stock market falls because of 911.

2007–2008 Lehman brothers

Now we have coronavirus.

We have seen the market reacting before. From time to time, it reacts in a significant way — going down 30%, 50% or even 70%. And not for one or two months, it could last for 2 years.

But what happened next? If we sit tight and do nothing, pretending that we have forgotten about ever making the investment? The stocks market recovered afterward and continue to rise….every time.

Implication 1: keep a long term perspective

If you look at the return of the S&P over 10 years period, on average it gives 10% return on investment. And that 10% would be realized only if you take the average figure for 10 years. This means that we need to have a long term perspective when investing.

Implication 2: volatility could affect retirement life

Even though over longer period the stock market tends to recover and rebound, it could affect your life seriously if you are retiring in 5 years or already retired because you have no or will be losing your job income soon. This kind of crisis (which will happen every few years) is not for the retirees because it takes time to recover and you never know when the bear market will end.

Implication 3: have an emergency fund

In order to be able to sit tight during the crisis, we need to have at least 6–12 months’ expenses as our emergency fund. This fund should not be invested — they should simply sit at the bank account for 100% liquidity (i.e. we can take it out anytime we need).

This gives us the bottom line and helps to calm our nerves — at least we know we are not going to starve in a year’s time (especially if the economy is really bad and there is risk of being fired!).

This is vitally important that we keep this minimal liquidity. People went bankrupt because they fail to keep manage their cash flow properly.

With this emergency fund, we can afford to have a ‘wait and see’ attitude rather than panicking that all our monies would be lost.

Implication 4: Dollar-cost averaging

If you adopt dollar-cost averaging investment strategy, now is the best time for you to absorb as many units of stocks or funds as you can while the market is at discount!

You should be excited about this because this is fabulous times for you to lower the average cost of your investment portfolio when the market falls! Don’t worry about the loss because you are going to dilute it by buying at a discounted price. So not only should you not sell your investment, but this is time to get some more!

Implication 5: Diversify to minimize loss

Under the threat of coronavirus, hotels, restaurants, airlines, travel agencies are the first to take the hit. And then there are all other business because business activities almost paused in the fear of getting infected as the Government advised people to stay at home and avoid meetings or gatherings.

There are some business doing well — such as pharmacy, medical, masks, disinfectant, health supplements, supermarkets, online-based business.

Therefore, instead of picking the stocks and trying to anticipate what the next crisis would be about, one way to get around this is to diversify. If we have hotel stocks (which drops by 50%) as well as medical stocks (which rises by 50%), our portfolio as a whole is breakeven (i.e. not losing nor profiting — when the market as a whole is down by 30%). This is definitely beating the market!

These are the insights I wanted to share in light of the recent financial crunch under the influence of Coronavirus COVID-19. Hope this can help you see the perspective from both risk and opportunity.

Note: this is not investment advice. I’m not financial planning professional. Just sharing what is working for me as part of my investing strategy or what I have learned on my investment journey. Please be reminded to do your own research and consider your own circumstances before making any financial decisions. You could also check with your financial professional to understand what would be best for your situation.