Since September 24th, the market has initiated a strong bull run that has been in motion for a full month. During this period, the market reached its highest increase of 33.7%, rising by 926 points. However, since the market touched its peak at 3674 points on October 8th, a market correction has occurred, which has lasted for 16 calendar days, with a decline of 10.2%, or 375 points.
Faced with such market fluctuations, many investors have chosen to hold light positions or even go short. Their reasons for bearish sentiment on the market are varied, including the lack of clear signs of economic recovery and the existence of gaps below the market. However, do these reasons truly hold water?
Regarding the relationship between economic recovery and stock market fluctuations, I believe we must not put the cart before the horse. Stock market increases often boost investor confidence and willingness to consume, thereby driving economic recovery. It is not the case that the stock market will only rise after the economy has recovered.
Furthermore, some investors argue that the market has already risen by 600 points from its bottom, and the cost-effectiveness of buying in now is far less than it was at 2700 points. However, if the market were to fall back to 2700 points, would you dare to buy? I believe many people would still hesitate, as they fear it might continue to drop to 2500 points or even 2000 points. Similarly, if the market continues to oscillate narrowly around 3300 points without a deep dive, and later rises to 5000, 6000, or even 7000 points, would you still consider the risk of the market at 3300 points to be high?
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Therefore, for those investors who are currently holding light or no positions, I suggest you stop hesitating. You can start by buying a small portion, such as 20% or 30%, with the specific ratio depending on individual circumstances. The advantage of this approach is to prevent missing out on gains and to maintain flexibility. If the market rises, you can enjoy the profits with your position; if it falls, you can gradually add to your position to lower your cost; and if you really do not want to add to your position, then simply cut your losses in a timely manner.
Investing is about the risk-reward ratio. Is the market at 3300 points riskier or more rewarding? I believe that buying in at this level might result in a loss of a few tens of points, but the potential return could be several or even dozens of times greater! Of course, the premise is that you believe this round of the market is a bull market and that you do not use leverage.
Some new investors are hesitant to enter the market because they feel that the market has already risen by 600 points from its bottom, and many individual stocks have generally increased by 50 points or even doubled, making the current cost of buying somewhat high. However, ask your veteran investor friends if the stocks they bought during the small bull market from 2019 to 2021 have recouped their investments. Most are still deeply in the red by thirty to fifty points or more! So, your current entry cost is actually much lower than that of most veteran investors!
Take a look at the monthly charts of major quality stocks! They are still at the foothills! Therefore, my point is: better to be trapped than to miss out! The pain of missing out is far greater than that of being trapped! Any investor who has been trading for more than five years will deeply understand this.
In this stock market full of opportunities and challenges, we need to remain calm and rational. Do not be confused or swayed by short-term market fluctuations. Believe in your own judgment and decision-making ability. Only in this way can we remain invincible in the stock market!
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