What to do with your investment when market corrects, when the bond yield hikes?

Last week, the general stock market is under the correction phase. Reporters, financial analysts and investment fund managers were saying that it was due to the increased bond yield. The investors fear that the government might increase the interest rate due to this faster than expected.

If you are selling your investment under such circumstances, you could be over-reacting. The US and the Asia market have been rallying up quite a lot since their lowest point in Mar 2020 last year. Periodic correction and market adjustment are expected. We cannot expect the market to keep going up without correction as it is an unrealistic expectation.

When the equity market is correcting due to the hike in bond yield, it denotes a good opportunity for us to accumulate value stocks or investments. We shall think about topping up or dollar cost averaging our investment than selling the investments (provided the investments are fundamentally good investments). Many researches have shown that equity market does better in higher interest rate environment than lower interest rate environment. When the economy is recovering, it is expected that the inflation will return. The government will increase the interest rate at some point of time in the future due to inflation. So, shall we need to worry about the market correction due to the bond yield adjustment? I leave the question for you to consider.

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