The ASX 200 (INDEXASX: XJO) fell by 3.5% this week, which is pretty painful when you consider it fell around 10% in the previous week.
Toilet paper is in high demand and plenty of investors are headed for the exits.
But I think it could be the wrong thing to panic-sell right now for a number of reasons:
This could be the best time to buy
When you look back over the past 15 years it's fairly obvious that the GFC was the period of the biggest share price declines. But you could also say that the GFC was the best time to buy shares. If you sold during the GFC you would have sold near the bottom.
If possible with your finances, I think that it's times of market declines like this that create the best buying opportunities. When investors are fearful it's time to be greedy.
I've already put some money to work this week into WAM Microcap Limited (ASX: WMI) shares and another investment today. But shares like Altium Limited (ASX: ALU) and Australian Ethical Investment Limited (ASX: AEF) could also be attractive buys right now.
The share market always recovers
Market falls can seem scary when going through them. Every market crash seems scary – the market is usually crashing because of a legitimate reason. However, the share market doesn't go to zero. The share market recovers.
The great depression happened in the 1930s, the world recovered. Two world wars happened, the world recovered. The GFC happened, the world recovered.
Even if the market falls another 15%, or another 25%, it will recover at some point over the next year or two. Whatever happens, it's just a temporary setback for the share market.
Selling could cause capital gains taxes and other selling costs
Selling shares is not frictionless decision. If you have made a gain on your shares then you'll probably have to pay tax on your capital gains. You don't want to voluntarily pay more tax to the ATO than you need to. It's the after-tax returns that are the most important to judge an investment by.
Taxes aren't the only thing that could be negative. You'd have to pay brokerage fees. Your money would be earning very little as cash in the bank – much less than dividends paid by most businesses.
Market timing often doesn't work
If you're making a decision to sell, you'd have to decide when to buy as well.
When would you buy? When/if the market falls 20%? 25%? It's impossible to know what share prices will do, particularly when adding investor psychology and government reactions into the mix.
You don't know how many people will be infected, other than to say it seems the number will keep rising for a number of weeks.
Foolish takeaway
I think the best action to take is to stay invested and keep steadily investing in your favourite ideas that are now better value. We're invested for the long-term, not just what happens in 2020.
