Never, EVER sell into Panic!

One of the key rules to long-term investing is to never sell into a panic. While it can be incredibly painful and difficult to resist the urge to liquidate your positions when a market-wide selloff happens, selling into a panic never pays off in a long run.

Why is it so important not to panic-sell?

Investors who sell into a panic are often also ones who wait for the market to “go a little lower” before buying back in. When the market does start to recover, these same investors will think that the market will test the lows and continue to stand on the sidelines.

Then, the market recovers and these same investors will now say the market is “too expensive” and won’t put their money back in. The result? These investors take losses selling into the panic and then miss opportunities by not buying on the bounce.

Never, ever sell into a panic.

Never, ever sell into a panic. This chart shows the day-by-day performance of all of Irk's assets

Click on the chart to enlarge it for a bigger view

The day-by-day performance of Irk’s assets

To further reinforce this point, I am such a nerd that I created the above chart which shows the performance of all of my assets (not just my Investments in Play, Speculation in Play, and Pandemic portfolios) on a day-by-day basis for the entire year.

At the market’s low on March 23, 2020 when the S&P 500 had sold off -35%, my assets were down an incredibly painful -17.56% (although that is an outperformance of the S&P 500 benchmark by nearly half – losing almost exactly half of what the S&P 500 lost at that point).

Even after a -35% drop, many analysts were warning that the market could sell off 50% or even more, causing many investors to panic and sell – even while the market was already down -35%!

Of course, March 23, 2020 ended up marking the bottom for the selloff as the Federal Reserve bank announced it would begin buying junk bonds and other assets to provide liquidity in order to stabilize the markets.

From there, the S&P 500 rallied more than +60% to close the year with a 16.26% gain. Personally, my total asset portfolio closed the year up +27.88%, once again outperforming the S&P 500, this time by nearly +12% (an outperformance of +71.46%).

Had I sold at the bottom, not only would I have taken a loss that would have required years to recover from, I would have also missed out on a nearly historic annual gain.

The moral? Never, ever sell into a panic.

Don't get mad, Get Irked and learn how to invest for yourself!


Disclaimer: Eric "Irk" Jacobson and all other Get Irked contributors are not investment or financial advisers. All strategies, trading ideas, and other information presented comes from non-professional, amateur investors and traders sharing techniques and ideas for general information purposes.

As always, all individuals should consult their financial advisers to determine if an investing idea is right for them. All investing comes with levels of risk with some ideas and strategies carrying more risk than others.

As an individual investor, you are accountable for assessing all risk to determine if the strategy or idea fits with your investment style. All information on Get Irked is presented for educational and informational purposes only.