Three fatal mistakes commonly made by investors during bear market
For many young investors, the current market corrections may seem like a fascinating experience. Some of them may view the volatile swings in the market as opportunities to make money from the stock market. This is not a flawed thinking but to mitigate the possibility of incurring heavy losses, it is important to avoid making three fatal mistakes commonly made by investors during bear market. Below are three lessons that I learned from the 1997’s Asia Financial Crisis and the 2008’s Great Financial Crisis.
Adopting the wrong strategy
Whilst it is true that when stock markets plunge, fear prevail and depress stock prices, thus presenting opportunities for bargain buys. But under such circumstances, I have learned that adopting a buy-and-hold strategy can be dangerous because you never know whether the stock counter can survive the storm. Instead, investors should be flexible and change strategy to momentum investing to exploit the fear sentiment in the market. This is where “contra” (buying and selling of stocks without forking out cash).
For example, during the crisis in 2008, I bought 100 lots of Mercator Lines and subsequently sold off my investments within two days, making about S$3500 of profits. It was not exactly a spectacular profit but then again, I made this amount of money within two days of trading and it was more than my monthly salary (back then I just started working for only a few years).
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