Did you sell when the stocks were in stratosphere?

Following my previous posting on "Did you buy when the stocks were on sale?", I thought it would be interesting to write something related.

The severe bear markets of October 1987, the Asian Financial Crisis of 1997, the SARS crisis, and the recent severe bear market were preceded by bull markets. Did you sell at the peak of these bull markets? Did you get out of stocks before the onset of the bear?

In 1987, I was not in the stock market. In the 1997 bullmarket, I continued to hold stocks in my portfolio. When the Asian Financial Crisis started, I did not sell these stocks. What were the consequences?

One counter went "kaput" - 100% loss. The prices of the other stocks were beaten down badly. Many remained lowly priced for multiple years. However, gradually the prices recovered. From then to now, this portfolio registered a reasonable gain. What saved or protected this portfolio from loss?

There are many factors. Firstly, investing for the long term is safe. The risk is in misjudging the business prospects of the companies you have in your portfolio. The risk is not in the price volatility. Secondly, by buying good quality stocks regularly at a fair or bargain price (a form of cost averaging). Thirdly, a gutsy move to add stocks to your portfolio in a bear market. I bought some stocks when the index was 600, only to see these stocks decimated when the index fell towards 300. Finally, by not selling during the depth of the bear market. To be able to do so, one need to know the difference between price and value and the conviction and ability to hold.

The present bear market started in 2007. This was preceded by a strong bull market when the KLCI reached a high of 1500. Did you sell during at the height of the bull market? What did you do then when the bear took hold? What lessons have you learned from your actions?

Selling is often a more difficult decision than buying. A stock with deteriorating fundamentals should be sold, sometimes urgently. For others, a relative reason for selling would be if the price of the stock has risen too high (overpriced) not in keeping with its underlying fundamentals.