This Could Be the Biggest Mistake Investors Make This Year

The bear market seems like it's never ending, but investors shouldn't be discouraged. Investments typically rise in value over the long term, but it's not going to be a linear path; stocks don't just go up all the time. Bear markets are inevitable, as are recessions, but so too are the recoveries that follow.

Buying and holding is what has made investors like Warren Buffett hugely successful over the years. Investors should stay the course and continue holding on to their stocks, assuming they are still good investments, for as long as they can. Trying to time the market could be a huge mistake.

Many stocks are trading near or at their lows

It's easy to be down on stocks right now, given the losses that some of them have incurred over the past year and a half. Teladoc Health (TDOC 1.41%), for instance, is a stock that has crashed more than 70% since the start of 2022. It's almost hard to believe that the stock, which today trades at around $26, was at a price of more than $300 in early 2021. It may never get back to those levels, but to assume that its tailspin will also continue may be misguided.

For one thing, the telehealth company is still growing. Sales of $629 million were up 11% in its most recent quarter (period ended March 31). Its net loss was also shrinking, finally going in the right direction after the company incurred billions in impairment charges last year.

Health device maker Medtronic (MDT 0.04%) is down a more modest 13% since 2022, but its valuation also didn't hit the obscene levels that Teladoc's stock did a few years ago. It has recently bounced back from 52-week lows. And while its 30 times earnings multiple may seem steep, the company's business should see better days now that China, one of its top markets, has reopened after restrictive zero-COVID policies.

As of the time of writing this article, there are also many other big-name healthcare stocks that are trading within 5% of their 52-week lows.

Data source: Yahoo! Finance.

Selling now could be a big mistake

Now may seem like a time to sell stocks rather than to buy them, since the bear market is ongoing and a recession could be inevitable. But some of the world's smartest investors agree that a bear market could be a good time to buy, and that timing the market is a risky idea.

Warren Buffett has said: "A market downturn doesn't bother us. It is an opportunity to increase our ownership of great companies with great management at good prices."

According to Peter Lynch, "Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves."

Shelby Davis says: "You make most of your money in a bear market, you just don't realize it at the time."

Just as the meme stock rallies of 2021 were risky times to be buying, now may be an equally risky time to be selling stocks.

A rally could come sooner than investors expect

The Fed recently announced another rate hike. It did, however, also indicate that it may pause on making more hikes, depending on what future data shows. That's a positive sign to the markets, as it means interest rates may be at or near the peak. The economy does appear to be slowing, and a recession may happen later this year. 

A slowdown could be welcome news as it may lead to hope that interest rates could be coming back down in the future. Lower interest rates could help the economy get out of a downturn. And since investors and the stock market as a whole largely rely on expectations for what the future holds, the recession wouldn't need to be over before stocks rally -- there would just need to be the expectation that better times are ahead for bullishness to return to stocks. Predicting when that happens is anyone's guess, which is why the safer option is to remain invested in stocks, provided you can afford to do so.

If you're not sure of which specific stocks to invest in, you may want to consider investing in exchange-traded funds, so that at least you have some exposure to the market.