Panic

My mother called me this morning.  “I’ve been worried about you.  Are you okay?”, she asked.

I told her that I was fine; that you only lose when you sell.  Which got me thinking…What rules should investors employ in this market?

  1. You only lose when you sell.  The same fundamental reasons for investing in the first place should apply.  No one subscribes to a “buy high, sell low” philosophy.
  2. Stock-based investments are now on sale.  Everyone one loves a sale.  I tell my wife that “sale” is my favorite four-letter word.
  3. A bear market is defined as a decline of 20% or more from a market high.  See #2 above.
  4. Since 1900, a bear market has occurred once every 3 1/2 years on average and has lasted about 329 days.  We’re nearing the average for this category.
  5. Don’t try to jump in and out of the market.  See #1 above.  Be patient.  This too shall pass, and investors don’t really want to miss out on opportunities because they lost their patience.

Every cloud has a silver lining.  Lost in all the bad news:  oil prices are down to less than $89 a barrel; gasoline futures are close to $2.00 a gallon.  If it costs less for consumers to put gas in their tank, they’ll have more money to spend on discretionary items they haven’t bought in a while.  They’ll also be able to make their credit card, auto loan, home equity and mortgage loan payments.

Like Warren Buffet says, “Things are never as bad as they seem, and they’re never as good as they seem”.

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