Think Twice Before Selling Your Stocks
Sharp moves for the U.S. stock market, like its recent 6% drop in just a couple of weeks, happen regularly. Stomaching them is the price investors have to pay for the bigger returns that stocks can offer over other investments in the long term.
But for investors losing money, it feels bad. This recent run feels particularly unnerving because of how incredibly calm the market had previously been. The S&P 500 is coming off a second straight year where it shot up by more than 20%, the first time that’s happened since before the new millennium.
Selling may offer some feeling of relief. But it also locks in losses and prevents the chance of making the money back over time. Historically, the S&P 500 has come back from every one of its downturns. Stock prices rose again after the Great Depression, the dot-com bust and the 2020 COVID crash.
“Data has shown, historically, that no one can time the market,” said Odysseas Papadimitriou, CEO of WalletHub. “No one can consistently figure out the best time to buy and sell.”
Put another way: “Keep on keeping on,” suggests Chris Fasciano, vice president, investment management and research, and chief market strategist at Commonwealth Financial Network.
Vocabulary:
Sharp moves – quick and large changes in price or value, “The company’s stock saw some sharp moves after the news release.”
Stomaching – handling or accepting something that is difficult or unpleasant, “For many people, stomaching the cost of a new car is very hard.”
returns – the profit or extra money you earn from an investment, “He put his savings into a fund that promised high returns.”
long term – a long period of time, usually many years into the future, “Planning for retirement is a long term goal.”
unnerving – making you feel worried, anxious, or uncomfortable, “The loud noise coming from the engine was very unnerving.”
previously – before a certain time; in the past, “She now lives in London, but previously she lived in Paris.”
S&P 500 – a list that tracks the stock prices of 500 big companies in the U.S., “Many investors look at the S&P 500 to see how the stock market is doing.”
new millennium – a new period of 1,000 years, referring here to the start of the year 2000, “Many technologies we use today were created after the new millennium began.”
locks in – makes a temporary loss or gain permanent, “Selling your house during a market crash locks in your financial loss.”
downturns – times when the economy or stock market drops and gets worse, “Businesses often struggle to survive during economic downturns.”
Great Depression – a time of severe economic hardship around the world in the 1930s, “Many people lost their jobs and savings during the Great Depression.”
dot-com bust – a time in the early 2000s when many internet companies quickly failed, “He lost a lot of money in the dot-com bust because he only invested in tech websites.”
time the market – trying to guess the perfect moment to buy or sell stocks to make the most money, “It is very risky to try to time the market rather than just leaving your money invested.”
consistently – always doing something the same way over a long period to get the same results, “She consistently arrives to work ten minutes early.”
Keep on keeping on – a phrase that means to push forward, stay patient, and not give up, “Even when the work gets difficult, you just have to keep on keeping on.”