At the beginning of last week I had the impression that the pull back in markets, which had been running for a couple of weeks, would be short lived. No harm in that but my mistake was to jump into the market in anticipation of a rise instead of waiting for confirmation that the the recovery had begun. I held on, fell ill and the rest is history.
I finally pulled out yesterday, nursing some nasty wounds. Have I pulled out just as the market was about to turn? It looked as though I had as the market spiked upwards during the day. But by the end it had pulled right back and I was glad I had decided to bite the bullet. Obviously an earlier exit would have been better but there is no point in wishing for something you failed to do.
It is a common mistake to hold on to losses because "in the long term good shares will come back". This may be true, but the long term is an indeterminate period and it may be very long indeed. If trading costs are modest and there are no tax implications it is probably best to pull out and return to the market when conditions are more favorable. This has two advantages
- if you really are in a period of serious pull back you should be able to reenter a position at a lower price
- by the time it is a good idea to return to the market there may be better opportunities and you can recover your losses faster by buying faster moving shares.