I think just about every investor has noticed the recent fall in the stock market. Since last week, the FTSE 100 index is down over 5%. Moves like these have the potential to cause misery and knee-jerk reactions.
Over the past number of years, however, I’ve tried to train myself to deal with these situations. When mass selling starts to occur, I sometimes think it’s better to do the opposite and buy the dip. Let me explain what I mean.
Losing positions, fear, and panic
Looking at my portfolio at this moment doesn’t make for pleasant viewing.
Shares in International Consolidated Airlines Group are down 39% in the past year. Rolls-Royce has tanked recently and has fallen 20% in the past year. But the real wrecker is Cineworld, down a whopping 73% in the past year. Other shares that I don’t own, like the tech-heavy Scottish Mortgage Investment Trust, are down 39% in the past year.
In the time since I purchased these companies, around two years ago, their performance hasn’t been great either.
| Stock | Performance Since Purchase |
| Cineworld | -57% |
| IAG | -7% |
| Rolls-Royce | -10.5% |
Scores like these could quite easily cause panic. It can also be disheartening to see share prices do the opposite to what I thought when I purchased shares. Dread may set in, because how much longer am I prepared to sit with these ailing stocks?
It’s at times like these, when the market is moving against me, that I fight against all these counterproductive thoughts. So, how do I deal with stock market falls?
An attacking, long-term strategy
It’s important for me to go back to the reasons for buying the stocks in the first place. I bought IAG, Rolls-Royce, and Cineworld in the midst of the pandemic and they were designed to be recovery trades.
A recovery from the economic shock of the pandemic is not an overnight job. These things take time. From that perspective, short-term fluctuations almost become meaningless.
This means that I resist the urge to sell off my positions, unless there is some catastrophic change to the way a company is being run.
In fact, I tend to operate contrary to the crowd. When share prices dip, I don’t sell, I buy. This gives me the opportunity to lower the average weighted price at which I have bought my shares. I’ll use this exact strategy with my current holdings.
This mentality requires taking a long-term view. The current short-term issues of inflation, interest rates, and the war in Ukraine won’t last forever. I’m using this time as an opportunity to pick up stocks at low prices.
These economic times are difficult for everyone, including those down heavily on investments. The pandemic taught me to invest for the long-term and to ignore short-term downturns.
Buy buying instead of selling, and acting as a contrarian, I’ve consistently built up positions in stocks at attractive levels. Investing can be emotional, but resistance to fear and panic mean I approach market dips with confidence and optimism.
