The Best Reason To Not Sell Your Stocks Now

The Best Reason To Not Sell Your Stocks Now

If you haven’t sold your stocks at this point, you may not want to.  Sure, the market could drop further. But selling now could be a big mistake.  Today, I’ll share the best reason to not sell your stocks now.  (read more below)

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Why Sell Now?

The sole reason to sell stocks at this point is to keep your balance from shrinking further. We never truly know (in advance) where the bottom is. And we may not have seen the bottom of this bear market yet. 

Not Sell Your Stocks Best Reason
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But selling at this point could end up being a big mistake. Here is the best reason to not sell your stocks now.

Bear Market Math

The foundation of our reason is rooted in what we’ll call bear market math. How much return do you have to earn to recover all that was lost during the downturn?

The Best Reason To Not Sell Your Stocks
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Let’s say the market only dropped 20%.  To erase the losses, you would have to earn 25%.

Right now, the current bottom of this bear market is about 34% lower than the all-time high. From that point, you have to earn 51% to erase the losses.

And if this bear turns uglier and drops say 50% from its February high, you’ll have to earn a 100% return to break even

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"Safe Assets" Offer Very Low Returns

Selling those stock holdings now and moving to the so-called safe assets can be a big problem.  In today’s environment, the potential future returns for those types of investments are very low. You might find a 6 month CD with a yield of 1%. 12 month CD’s are only slightly better. And we all know most of our savings accounts don’t even pay that much. Those low returns make recovering your losses very difficult—if not impossible.

And those prospects look even worse when you consider what happens to the shares of those companies immediately following the bottom of a bear market.

Catching the Rebound

This is our 15th bear market since the end of World War 2.  Here’s what happened following the bottom of the bear markets:

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  • The average price increase 1 month after the bottom was almost 31%.
  • When we look 6 months out from the bottom, the average price gain was nearly 26%.
  • 12 months after the low point, the average price increase was 39%.
  • And 2 years after a bear market bottom, the average price increase was nearly 60%.  

And remember, this is only price increases.  It doesn’t factor in the additional returns from dividends!

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It Happens Early...

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This is interesting.  Prices one month from the bottom were higher than they were 6 months later in every single recovery.  A major portion of the recovery happens very early.  Missing out on that could have a significant impact on your future.

These gains may not have erased all the losses in any of those bear markets. But the surge immediately following the bottom helped those who stayed invested–even if their accounts fell further—recover a lot faster than if they moved to “safer havens.” And this is the best reason to not sell your stocks now.

Download
3 Things You Need to Know About Bear Markets

In this Free Guide, we…

  • Define A Bear Market
  • Share 3 things you should know about them.
  • Offer 4 ideas you can use to improve your future.
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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.  This is now his 5th bear market.  Unfortunately, it won’t be his last.

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