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Ups and Downs- Market Volatility


weddingbears The market has been going south the past two weeks. For people who were predicting a bear this year, it is a welcome relief, especially if they have taken short positions.

I had attended a wedding solemnization of a relative over the weekend and the market reminded me of the ups and downs of a relationship. So what do you do when it is down?

You can hold on, or you can sell out.

For me personally, after the upheavals of 2007 and 2009, I think I rather hold and look for opportunities to buy some when it is “For Sale.”

We often buy shares when everyone is buying and it is at a near high and become fearful when market is falling and no one buys. To do well in the stock market, I guess you have to be a bit of an educated fool, to go in when nearly everyone is fearful.

So you hear of wise sayings that tell you to sell when even the aunties in the market are taking about stocks and shares. And buy when people think you are crazy to be buying.

Volatility is part of what you get when you buy a share. If it doesn’t even move (I bought a share like that once- YHS, and sold it off like a year and half later with the price not even moving at all, neither up nor down when I checked on it), then it either indicates poor liquidity or something is wrong.

Another piece market wisdom commonly heard is that if you cannot bear the thought of your shares dropping a gut wrenching 40% and will have sleepless nights, stay out of the market. It is called the sleep test.

It dropped beyond that in 2009 and I slept like a baby, so I think I qualify :)

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