Stock Market Keeps Falling: Should You Buy More or Cash Out? Backtesting 40 Years of Market Data Reveals This Investment Strategy Still Delivers Steady Profits

Global stock markets continue to fall, with Taiwan's equity market plunging again today (29th), dropping over 1,800 points during trading and losing the 40,000-point benchmark. Many investors worry whether the AI boom is cooling down or if the market has already entered a bear cycle. Financial institutions believe this correction mainly reflects the market's reassessment of AI infrastructure financing models and capital costs. However, rising credit risk does not mean the industry's growth momentum has disappeared, nor is it sufficient to conclude that the long-term AI trend has reversed. In the face of short-term volatility, investors should focus on fundamentals such as corporate earnings, policy direction, and industrial demand, rather than exiting the market emotionally and missing out on potential rebounds.

"What the market fears isn't that AI has no future, but that it's now facing stricter financial scrutiny," said Chang Jung-Jen, General Manager of Chinatrust Funds. Recent market attention has centered on NVIDIA potentially providing financing guarantees for OpenAI's data center and chip procurement, sparking concerns over corporate debt capacity and credit risk, leading to profit-taking pressure on tech stocks. However, AI demand hasn't suddenly weakened—it's just that the market has begun examining the capital efficiency of AI investments. More importantly, AI has been elevated to a strategic industry critical to U.S. economic competitiveness and national security, and policy support remains unchanged.

Chang pointed out that as long as AI infrastructure continues to advance, the ultimate beneficiaries will be supply chain players mastering key technologies. Taiwan is a core hub in the global AI industry, with leading advantages in advanced process technology, advanced packaging, AI servers, networking equipment, and key components. As U.S. tech giants continue investing in data center construction and countries worldwide accelerate the expansion of computing and energy infrastructure, related investments will eventually return to hardware demand, continuously fueling growth momentum for Taiwan's supply chain. The long-term foundation for Taiwan's stock market remains solid.

He noted that during every major market correction, investors often wonder, "Should I sell out first?" But what truly impacts long-term performance isn't short-term declines—it's exiting in panic and missing the subsequent rebound.

Chinatrust Funds backtested the S&P 500 index and found that investors who stayed fully invested achieved a cumulative return of 333.4%. Those who moved to cash when the VIX exceeded 33 saw returns drop to 204.2%. If investors exited when the VIX rose above 20, returns fell further to just 105.4%. This shows that repeatedly trying to time the market often leads to missing out on long-term gains compared to staying invested.

"Many investors worry: What if I just bought at the peak?" Chang explained. The real factor that widens long-term performance gaps isn't entry timing, but the ability to consistently accumulate positions during market corrections. Backtesting the "Super Bottom King" strategy, Chinatrust Funds found that even if investors entered at market peaks—such as the 2000 dot-com bubble, the 2007 financial crisis, the 2020 pandemic, or the 2022 rate hike cycle—their performance over 1, 3, and 5 years outperformed both panic-driven stop-loss approaches and simple dollar-cost averaging. This demonstrates that disciplined, systematic buying is superior to predicting market highs and lows.

Chang stated that while the AI industry is transitioning from high-speed growth to a new phase emphasizing capital efficiency, its long-term trend remains unchanged. Facing market volatility, instead of spending time guessing entry and exit points, investors should build disciplined investment habits. Using the "Super Bottom King" strategy to automatically buy more during market pullbacks and diversify entry costs can replace emotional trading with disciplined investing, offering a better chance to capture the long-term investment opportunities brought by AI's growth.