I've only recently bought some mutual funds last year. Since then, my mutual funds' value has been losing money. When I set up this fund with my broker last year, for my investment portfolio I selected the following options:
- risk: aggressive
- investment timeframe: 10 years +
- likelyhood of withdrawal: unlikely
I still stand by what I selected. But recently, I got into a discussion with a friend about whether or not it is better to take out take out your money to cut your losses and reinvest later or is it better to just ride it out.
I can see the benefit of what he means by cutting losses and reinvesting later, as long as the commission rate is smaller than future amount that you would lose.
But I've also heard from many people that it is best to just ride it out during a bad market. My question is what is their reasoning for stating this? Does it depend on contexts (ie, stocks vs mutual funds, timeframe, etc?).
I understand that in the long-term, stocks have a high chance of going up, despite the many fluctuations they experience in the short term. But considering my friend's POV, why shouldn't I just take out my money now and reinvest later? Is this type of investing style more prevalent in stock investors than mutual fund investors?