Co-produced with Beyond Saving

The pullback we saw during March as a result of the pandemic turned out to be one of the best opportunities that the markets has offered investors. When prices were falling at the time, we were encouraging buying the dip through a series of articles. Unfortunately, some were met with hundreds of comments to the effect that the impact of COVID-19 was going to be far worse and that investors should “sit on the sidelines” to wait and see how bad it would be. Some were even saying everything should be sold because it would certainly get much worse.

Unfortunately again, many investors were doing just that. Share prices go down precisely because more people are trying to sell than are trying to buy. We get the temptation, when you are down 20%-30% or even more, it’s very easy to “cut your losses” and sell “before I lose more.” That’s a very natural response. And if you sell, and then manage to buy back at a lower price, that works. This is why we encourage investors to keep a long-term view.

In many cases, that isn’t what happens. Investors sell out of fear and then when the price bounces back up they have one of two options, try to buy back in, or sit on the sidelines. As a result, they sit on the sidelines and miss the most profitable part of a bear market – the recovery.

Going back to history, following each bear market there was a strong recovery, and this year was no different. At HDO, instead of trying to catch the peaks and valleys, we buy in small bites. With dividend income streaming into our accounts several times a month, we always have access to at least a little bit of