Navigate Market Waves With Insightful Choices

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Introduction

A stock market drop can feel unsettling. Yet, for long-term investors, it often presents one of the best opportunities to buy shares—provided they are shares in good companies.

There’s an old saying: “If making money were easy, we’d all be rich.” That’s true. But here’s the twist—making money can be simple, if not easy. The key lies in patience: giving your investments the time to grow, mature, and eventually reward you.

I make no apologies for being a long-term investor. I don’t believe in get-rich-quick schemes. If there are any, they’re either unsustainable—or illegal.

Some traders think differently. They believe they can jump in and out of stocks, timing every swing for quick profits. But time and again, markets have shown that those chasing fast money often end up disappointed, while those with discipline reap the bigger rewards.

So, when markets take an unexpected tumble—as they have recently—what should we do?

In essence, investors face just three choices:

1. Hold and wait for recovery

2. Sell and cut losses

3. Buy more shares at lower prices

Each choice has its merits. And because no two investors share the same financial position, there are no one-size-fits-all answers. The key lies in understanding what each option means for your portfolio, your goals, and your risk tolerance.

Patience Pays Off! Wait for Recovery

Companies exist to make profits. Without profits, they will eventually disappear. The more profit a business generates, the more valuable it can become. Of course, even the strongest companies can have good years and bad years—profits are never a straight line.

What matters is the long-term trajectory. Over time, a well-managed company should be able to grow its earnings by adapting to challenges and seizing opportunities. If we’re invested in such a company, we shouldn’t lose sleep over temporary share price declines.

Remember this: a share price reflects what the market expects from a company’s future, not necessarily what the company is doing today. It is what investors call a “leading indicator.” So when prices fall, it often signals pessimism about the outlook—not a collapse in fundamentals.

At the most basic level, a share price is the product of two components: earnings per share (EPS) and the price-to-earnings (PE) ratio. EPS reflects the company’s actual profit performance, while the PE ratio captures market sentiment. The crucial difference is that EPS moves gradually, tied to the business itself, while the PE ratio can swing wildly from day to day based purely on mood.

That’s why long-term investors should keep their focus where it belongs—on earnings. If earnings power remains intact, then the investment case remains intact too, regardless of short-term volatility.

👉 The takeaway: Ignore the noise of sentiment-driven PE swings. Anchor your decisions on earnings and fundamentals, because those are what truly drive long-term wealth creation

Escape the grind: Cash in now...

There are times when selling our holdings in a company may be the right decision. But let’s be clear: selling is a drastic step, and it should never be done in haste.

The first reason to consider selling is when the outlook for the company has genuinely deteriorated. If management appears unable—or unwilling—to address the challenges it faces, then it may no longer be the business we once believed in. In such cases, the sensible step is to revisit our original reasons for buying the stock. If those reasons no longer hold, then it may be time to move on.

Another valid reason to sell is personal rather than company-specific. At certain stages of our investment journey, it may make sense to shift from riskier growth investments into more stable instruments such as bonds or cash. For example, in retirement, capital preservation often takes priority over chasing returns.

Ideally, though, we shouldn’t wait for a market downturn to prompt action. Portfolio “life-styling”—periodically rebalancing to reflect our age, risk tolerance, and financial goals—should already be part of our long-term strategy. That way, we’re less likely to be caught off guard by sudden volatility.

👉 The key is this: sell for the right reasons, not because of short-term fear. If our original investment thesis still stands, holding—or even buying more—may prove far wiser than selling into weakness.

Boost Your Portfolio Now

Buying more shares during a stock-market drop can be a smart move—provided we have spare capital and, more importantly, we are investing in quality businesses.

If we already hold stocks that have declined, adding more at lower prices reduces our average cost. This is called “averaging down.” But the principle only works with good companies. A fundamentally strong business does not become weak simply because its share price has fallen. On the other hand, cheap rubbish will always be rubbish, no matter how low the price.

As Warren Buffett once said, “The future is never clear. You pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.” His point is clear: the best opportunities often come when fear dominates and optimism is scarce.

Buffett also reminded us, “When it’s raining gold, reach for a bucket, not a thimble.” In other words, when quality companies are available at bargain prices, it’s time to act boldly—not timidly.

👉 The lesson is simple: downturns are not just something to endure; they can be golden opportunities to strengthen our portfolios for the long run.

Conclusion

It is important to appreciate that stock-market declines are not uncommon. The reasons may differ each time—be it interest rates, inflation, or geopolitical shocks—but history shows that markets have always found a way to recover and move higher.

In the words of Mark Twain: “History doesn’t repeat itself, but it often rhymes.” And in the stock market, that rhyme is unmistakable: declines are temporary, but progress is permanent.

For patient investors, every downturn carries the seeds of the next upturn. Those who stay the course—or better yet, use declines as opportunities—position themselves to reap the rewards when the inevitable recovery comes.

Happy Investing!