Actions: the markets fall, should we sell, buy or wait?

Faced with the pruning of markets, many investors wonder: should you sell, keep good or buy downwards? Here are the right reflexes to adopt – and the errors to avoid – when the pitch stock.

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Mayday, Mayday! Stock exchange courses continue to tumble on Wednesday, April 9, date of entry into force of customs duties announced by Donald Trump last week: Nikkei 225 closed down -3.93%CAC 40 to -3.35%. For their part, the main American indices managed to limit the breakage to the opening (the Dow Jones fell 0.1%), even to rebound (the Nasdaq gained 0.1%, the S&P 500 0.35%), but without erasing the massive losses of the past week.

A stock market hole which could in bonus last, taking into account the risks of inflation and recession that these new customs prices weigh: “Companies are in full uncertainty, we do not know how the negotiations will finish, how the production chains will be reorganized on a global scale, etc.”Pointe Souleymane-Jean Galadima, co-founder of Sapians, a Family Office Digital. Also, if the turbulence area continues, what strategy to adopt to keep the course? Are there investment behavior to adopt or on the contrary to banish?

“Stop or even?”

In the event of a free fall in the course of your actions, the main question you need to decide is that of “Stop or even” : Should we sell before it drops further, or on the contrary keep your position hoping for a rebound? For Ambroise Lion, Managing Director of IG France, a trading platform, this will greatly depend on your investment horizon: “Our customers who have long -term positions are good, because it is not on this market movement that their strategy is founded, they therefore remain invested, even continue to invest. Conversely, those who hoped for a short -term gain come out of their positions. ”

For the latter, there is a dangerous behavioral bias to avoid, the effect of arrangement, that is to say, keep a losing position for too long. To avoid it, “Investors experienced are used to configuring a” guaranteed stop “which will automatically cut their position as soon as the negative scenario they had anticipated” occurs “explains Ambroise Lion. To give an idea of ​​the trigger threshold of the order of sale, we can apply the rule of “one for three”: for a 10% gain hope, we can configure a “stop” as soon as there is more than 3% decrease on the underlying.

Staying invested is statistically the best solution for long -term investors

On the other hand, for investors who are not afraid to collect losses for an indefinite time, staying invested is also an attractive possibility, because itch of your positions too early makes the risk of missing a rebound potential of the equity markets: “A BlackRock study showed that over 20 years, it is the 10 best days of stock market that generates the biggest performance, and that it is divided by two if they are missed. However, on these 10 days, 60% arrive within two weeks of one of the worst scholarship days ”underlines Souleymane-Jean Galadima.

Be careful however, it is also necessary to take precautions to take advantage of a narrow reddolling of the courses, in particular to avoid the effect “Fomo (Fear of Missing Out)”: “When it starts again, we want to take part in these opportunities, but it can be very dangerous if we do not prepare it enough, you have to analyze the market, the underlying, place a limit, put a little rigor to prevent this feeling from being devastating”warns Ambroise Lion. In other words, if it should not be panicked when the markets drop out, you must also avoid the euphoria which would push to buy everything and anything when they regain altitude.