Stock Selling: 3 Reasons I’m Still Investing Right Now

Investors have been hit hard in recent weeks, with the stock market taking a sharp turn. The S&P 500 is down nearly 7% from its peak in mid-June at the time of writing, while Nasdaq it’s down nearly 11% in that time — officially entering correction territory.

Periods of volatility are unsettling even for seasoned investors, so if you’re feeling a little rattled by this market crash, you’re not alone. But keeping a clear head and staying in the game is essential not only to survive a downturn, but also to take full advantage of the earning potential.

Right now may not seem like a smart time to buy, especially if prices are set to fall further. But there are three good reasons why I keep investing, and you should too.

Image source: Getty Images.

1. The market is too unpredictable to time it accurately

In theory, the best strategy would be to sell your shares when prices peak to get out of the market before it goes down. Then, when stocks are at low prices, you can reinvest for a bargain. But in reality, it’s almost impossible to accurately time the market like this.

While the market has been falling fairly steadily in recent weeks, no one knows if this trend will continue. There’s always a chance it will come back, in which case buying now while prices are lower may be the smartest move.

An example: in early 2020, when the market fell due to fear surrounding the COVID-19 pandemic, most people (including experts) did not expect prices to rise just a few weeks later. Those who continued to invest during the recession were in the best position to get stocks at the lowest prices, even before the market experienced another bull market.

^ SPX data by YCharts

Now, there are no guarantees that the market will continue to break records like it did in 2020 and 2021. But it could, and the best way to maximize your potential gains is to keep investing now.

2. All recessions are only temporary

No matter what happens in the coming weeks or months, even the worst downturns won’t last forever. By simply staying in the market, you can ride out the storm without losing money.

Technically, you only lose money in the stock market when you sell your investments. If your stock is already down and you sell now, you’ll lock in those losses. But if you simply hold onto them until the market recovers, their values ​​will likely rise again and you won’t have lost anything.

Even if this decline turns into a bear market, it is still only temporary. The average S&P 500 bear market since 1929 has lasted 286 days, according to Bespoke Investment Group data. That’s about 9.5 months.

Meanwhile, the average bull market between 1929 and 2023 lasted 1,011 days, or about two years and nine months. In other words, there are good reasons to be optimistic about the future, and by staying invested through the tough times, you’ll be well-positioned to take advantage of the inevitable growth.

3. Sales can be smart buying opportunities

Investors are often encouraged to “buy low and sell high” to maximize stock market gains. While market timing is difficult to “sell high,” now is a fantastic opportunity to “buy low” — or at least lower.

Again, actual market timing is next to impossible, so no one knows if prices have more to fall. But instead of waiting for stocks to bottom out, take advantage of the lower prices you’re seeing right now.

Stocks have been incredibly expensive over the past year, and while recessions are hard to bear, they can provide a much-needed break from high prices. By investing now, you could save hundreds of dollars on normally high-priced stocks.

Two important caveats

While investing in the stock market is a fantastic way to build wealth, there are some important things to keep in mind before you buy right now.

First, make sure you have a solid emergency fund with enough savings to cover at least three to six months worth of general living expenses. If the US economy worsens and workers face more layoffs, it’s wise to have a strong cushion to protect you without having to sell your investments.

Second, if you can invest right now, make sure you pick the right stocks. Many companies may perform well when the market is booming, but may struggle to bounce back after a downturn. By investing in strong stocks from companies with solid fundamentals, your portfolio is much more likely to survive any potential volatility.

Market dips are never easy, but they can be much more tolerable with the right strategy. By continuing to invest in strong stocks and keeping your focus on the future, you can make the most of this downturn and maximize your long-term gains.