It’s a most turbulent and unique period for every investor. Even Warren Buffett never has such experience over his very long and successful career as the most respected investor in the world. He has not made any drastic move and is sitting on $137 billion dollar cash pile, except selling all the airline shares. There are a lot of people thinking he is too old to make any smart move quickly, and they can outsmart him. The wild fluctuation of certain shares, such as Hertz and airlines, which were impacted severely by the pandemic, are the evidence of active trading by these people.
The reality is that nobody is able to predict the near further precisely. Will the pandemic be over next month, quarter, or even next year? Will there be 2nd wave of sudden increase of hundreds and thousands infected people? How sever the impact of shutdown of most of economic activities caused? How fast will the economy pick up? Nothing is for sure. A pandemic like this has never happened in modern era. The only thing Warren Buffett being sure was that the airline would not be able to recover for next 2 to 3 years and the whole industry will not be the same again.
So, what to do now?
Currently the stock market already run ahead of economy recovery, if you look at the valuations and the economy data. It will be most likely that the market will go down, before going up much further. So, should we sell shares? In fact, nobody could predict precisely which stock at what price would drop. Whoever thinking he(she) is able to do that is an idiot.
As I said in my previous article, the great companies will not only survive, but rise higher afterwards. Therefore, the best strategy is sit on your winners tightly without doing anything. Someone may think that one will miss many chances of taking profit and making smart moves to maximize the opportunities provided by this turbulent market. Remember, one of the very important character of wiseman is that he admits what he don’t know.
On the other hand, you may consider to sell some shares of not so great companies when its valuation seems too high, and wait for the market fall to pick up the shares of great companies.
So get ready for recovery in the longer term. That’s for sure!