Bear markets - strategies for coping

Malthusian

youth_leader said:

Thank you Albermarle, my IFA has said he will continue to review the investment and the ISA, the ISA has dropped the most.  I will concentrate on how much it has gone up since 2016.  If it drops to my original investment level, would you take the money out and put into normal savings? 

That would be a less extreme version of cashing in when they've dropped below the original investment level (aka turning a paper loss into a real loss).

If (say) you hold investments for five years and they go up and then down to their previous level, and you cash them in, you haven't lost money but you have taken on five years of investment risk for no reward. Reward that you will get eventually if you hold for the true long term. You would be giving someone else a free ride on the five years of risk you bore.

JohnWinder

What about 'selling the dip' and 'buying the rise'? Getting out, part of the way down, and getting back in during the rise.

Here's another simulation showing how it would have worked out with better returns than 'buy and hold', but there's a catch (you might have to wait a long time): https://ofdollarsanddata.com/right-now-but-wrong-later/

InvesterJones

JohnWinder said:

What about 'selling the dip' and 'buying the rise'? Getting out, part of the way down, and getting back in during the rise.

Momentum investing. It's good in that you take advantage of other people who follow later, but bad in that you're yourself following someone else by definition, and there's no way of knowing how long a dip or rise will last. It tends to look great if you apply it retrospectively as you can tune the parameters to show how beneficial it *would* have been for some arbitrary rules, but as we're always warned - past behaviour isn't indicative of future - certainly not to the point of short time frames.

adindas

This is Benjamin Graham advise in his book "The Intelligent Investor p.223". But remember as Benjamin Graham is the father of value investing; he only bought high quality business with great valuation, undervalued. Not blindly buying the dip of any stock just because the price are dropping significantly..