So, as you may have heard the S&P/ASX 200 (ASX: XJO) is down pretty big today.
This may come as a bit of a shock to investors used to an ever-increasing market, at least over this year so far – and the market has a notoriously short memory. Saying this, you may be considering some selling today – after all, a lot of investors are already doing so.
But this is probably a mistake – generally speaking.
One of the biggest mistakes that most investors make is trying to time the market – it's easy to look at a stock graph, see the peaks and troughs and think about buying low and selling high for some easy money. In reality, it's not easy, and you will probably get burned if you try – the best investors like Warren Buffett don't do market timing so I don' think that the average (or even above-average) investor can do better.
For one thing, jumping in and out of the market is expensive – you will have brokerage fees and taxes to think about – and these can eat into your long-term returns even if you do get lucky. By letting things be, you won't have any extra (and unnecessary) costs.
Also, keep in mind that often the best days of the year for the market normally come right after a crash or correction. If you're out of the market at these times, you will be chasing the market back up and severely handicapping your overall returns in the process. So don't think you'll sell today and buy back in when the market turns – it's a fool's game for the average investor.
Foolish Takeaway
If you hold the mindset that market corrections or crashes are merely top-up opportunities – you will be a far more successful investor over time. The time for selling was last week when stocks were looking frothy and everyone felt rich. Remember what Buffett says – 'be fearful when others are greedy, and greedy when others are fearful'.
