1. Never try to time the market
I had a ringside seat to this phenomenon played out during the circuit breaker.
When the announcement of a tighter lockdown was made on April 3, I expected a stock in my portfolio, which was already battered down, to dive even more since the shutdown would affect 100 per cent of its business.
I felt a tinge of regret then for failing to sell the stock earlier but consoled myself that since it was a longer-term investment, I should not be overly concerned with the near-term volatility.
But what surprised me was that when trading resumed the following Monday, the share actually went up. The logical explanation for this unexpected event, in broker-speak, was that the share was already oversold and since the “bad news” was not that bad, the stock recovered.
Its price continued to go up over the following two months after a higher-than-usual dividend was announced, perhaps as an assurance to shareholders that it remains on solid ground.
Had I tried to time the market by selling the share earlier so that I could buy it back at a lower price later, I would have suffered losses because the dip never happened.