Market Corrections: When to Hold, When to Sell, and When to Buy Back In
Sharp Corrections and Market Recoveries
Some of the best moments in the market are the runaway rallies before a correction. If you don’t participate in those exuberant periods, you’ll never capture the market’s full returns. In other words, don’t let fear hold you back. Investing is a gameplay when the market is “on.” Enjoy the ride, ignore the finger-waggers, and let the profits roll in.
Corrections are a regular feature of the market. Expect a major one every decade (50% drawdowns), a tradeable one every three years (10-20%), and frequent 5% pullbacks.
When to Hold, When to Sell
Corrections happen fast. You don’t get much time to react. The stock market is never about certainty ahead of time – you work with probabilities. If the market has rallied hard and suddenly drops, the odds suggest you’ve hit a top. So sell. You might be wrong, but when the market has climbed significantly, there are profits to lock in. And if you’re not a fund manager, underperformance is irrelevant. Play the probabilities – sell when it could or should be a top.
On the other hand, recoveries take much longer. In every major sell-off, it takes far longer to regain lost ground than it does to crash. After the pandemic, the market took 14 months to recover from a 23-day drop. That means you have plenty of time to buy into the recovery – there’s no rush to catch the exact bottom. The market never crashes upwards.
The Myth of Defensive Stocks in a Sell-Off
Don’t bother switching into defensive stocks when a correction starts. Defensive stocks (TLS, WOW, COL, CSL, COH, ORG) will likely underperform in a bull market and, while they hold up better in a downturn, they still fall. So what’s the point? Holding defensive stocks in a correction just means losing money more slowly.
Most articles telling you to “rotate into defensive stocks” are written for fund managers who need to protect relative performance. But as an individual investor, your only real defence is cash. Defensive stocks won’t serve you unless your goal is income rather than capital growth.
Why Holding Cash Is More Powerful Than You Think
No one in the finance industry will tell you to sell. Fund managers, financial planners, and brokers all need you to stay invested in their products. If you want to move to cash, expect resistance.
If you want to sell, be firm. Avoid making calls to your adviser—put it in writing. When it’s in writing, they have to act.
And remember, there’s nothing wrong with holding cash. At worst, you miss out on potential gains, but you’ll always have the power to buy back in when the time is right. Going to cash can be a massive relief, especially when the market turns wild. Instead of fearing a crash, you’ll be hoping for one. Selling at the right time isn’t just about protecting wealth—it’s about mental clarity.
If you want to stay ahead of the game and never miss a crucial market insight, join us at Marcus Today. Get notified when new analysis drops, so you’re always in the loop and ready to act when it matters.
I’ll see you next week, where I’ll discuss:
- How to Spot the Market’s Turning Point – Why sentiment, not fundamentals, signals the bottom.
- Using Market Sentiment to Buy at the Right Time – What signs to look for.
- Stock Selection After a Correction – Which stocks bounce back fastest and why.
- Lessons from Past Market Crashes – What history teaches about market timing.
Don’t just watch the market—stay ahead of it. Join us.
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Marcus Today’s 5-Step Checklist for Timing the Market—from me to you.
A no-nonsense guide to knowing when to hold, when to sell, and how to stay ahead of the herd. Follow these five steps, ignore the noise, and make smarter moves in the market.
– Ride the trend – When the market is going up, leave it alone. Ignore the noise, don’t sell just because something has gone up. The best gains happen in the final, irrational push.
– React, don’t predict – You can’t call the top in advance. Instead, watch for actual signs of a downturn and react when things start going wrong.
– Watch the herd, don’t follow it – The market is driven by emotion. Stay objective, logical, and ready to move when sentiment shifts.
– Be decisive when the moment comes – The worst mistake is doing nothing when a clear market top is forming. Sell when multiple warning signs align.
– Accept that you won’t sell at the peak – You’ll never perfectly time the top. Expect some losses from the peak before selling, and move on without regrets.