The ASX is in meltdown: Is it time to sell?

After falling another 2.5% today and Friday, the ASX All Ordinaries and ASX200/300 indices are now lower than they were 12 months ago – around 1.37% lower, in fact.

That means if you had money in an index-tracking fund or your portfolio broadly represents the ASX, you’ve actually gone backwards during the past year (excluding dividends).

Excluding dividends, technically speaking, you’ve lost money.

Except you haven’t, because you haven’t sold anything yet… Have you?

Selling when the ASX is falling is a sure-fire, guaranteed way to destroy your wealth; it works every time.

If you hold your shares, there’s a chance – a really good one, depending on what you own – that you’ll make it back in dividends and price growth later.

But if you sell today, your losses are guaranteed.

So investors are forced to choose between definitely losing money today, and maybe making a profit in a few months’ time.

If there’s a compelling reason to sell your shares, such as overexposure to property loans or coal or iron ore, then sell away.

But you don’t have to wait until the ASX slides before dumping the dullards from your portfolio.

My portfolio, largely unaffected until very recently, is awash in red today:

Reject Shop Ltd (ASX: TRS) – down 2.7%

XERO FPO NZ (ASX: XRO) – down 4.65%

Lifehealthcare Group Ltd – down 2.1%

Challenger Ltd (ASX: CGF) – down 2.6%

And there’s more, but as you can see I’ve been hit disproportionately hard by the market, with most of my shares falling more than 2%.

Despite that, I made one large purchase this morning because I saw a price I couldn’t refuse on a company I desperately want to own.

So, what is it?

I can’t say because ethical rules prohibit me from writing about companies I’m trading to avoid conflicts of interest.

This company will probably – I’d say inevitably – trade lower in the near future.

Yet I’m care-free, because I bought shares at a price that I’m eminently happy with and at a discount to what I think the company is truly worth.

Decisiveness is a winner’s game, and the very best of winners know how to plan, marshal their resources, and wait before hitting like a lightning bolt at their opponent’s weak spot.

This isn’t a boxing match. There’s no 100kg Muhammad-Ali waiting to belt you one if you get it wrong: You are your own worst enemy. Don’t stress yourself out about it.

The best share market winners right now are waiting, marshalling their cash, because they have already researched a couple of key companies they want to own, and are waiting for the right moment to strike.

When it comes, they’ll buy, instantly and without second thoughts – because they already know what they’re getting themselves into.

If you’re struggling for ideas, here are a few great companies with some price targets I personally would buy at:

Collection House Limited (ASX: CLH) is an absolute buy under $2.

BHP Billiton Limited (ASX: BHP) is an absolute buy at around $30 or less.

And The Motley Fool’s pick is an absolute buy right now! 

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Motley Fool contributor Sean O'Neill owns shares in Reject Shop, Challenger, Lifehealthcare, Xero, and Collection House. The Motley Fool owns shares in Xero.

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