First ask yourself, do you agree with this statement 'The value of my home just fell 20%. I'd better sell it right now!'?
We know home prices fluctuate. However, I guess it's hard to imagine any homeowner would agree with this. I bet nearly 100% of homeowners will ignore such temporary changes in valuation as we tend to focus on the long-term value of our home. Agree?
We know home prices fluctuate. However, I guess it's hard to imagine any homeowner would agree with this. I bet nearly 100% of homeowners will ignore such temporary changes in valuation as we tend to focus on the long-term value of our home. Agree?
And yet, this panic selling is exactly the same type of thinking being used by investors today who sell as the market officially enters bear market territory – down more than 20% – simply because stock prices have fallen. Well, there is no sugar-coating that it is really bad out there and the bear market has hit us now. This is a unique bear market in the making as there has never been a bear market developed without an imminent financial or credit crisis. The US economy is booming and fundamentally sound at the moment but the market has slipped into the bear market within 2 weeks, the fastest in history, truly unprecedented! But believe me, it will be over. This is a fear driven bear market that we mankind can overcome always. I don't know how soon it will be but I bet it won't be a typical bear market that usually takes about 18 months in average to go through. I think it is more likely it may take a few months to get it over. In the mean time, draconian gyrations will surely happen. See what we saw during the 2008-2009 financial crisis: After the three dramatic sell-offs they mentioned during the 2008 and 2009 bear market, the S&P 500 ripped higher every time...
- After that first drop (-27.2%), the S&P 500 shot 18.5% higher in six trading days.
- After the next drop (-25.2%), the S&P 500 rocketed 19% higher in one week and continued to rise to a 24.2% gain in six weeks.
- After the final drop (-21.4%), the bear market ended. The S&P 500 jumped 23.1% in 13 trading days, 39.9% in three months, and 79.9% in 13 months.
It is a bit mouth-watering right now, at lest for me, to see so many quality stocks which were quite expensive just 2-3 weeks are now 30-50% down. Should I run away and hide in the hill these days or should feel really happy to add more or buy new such stocks for long term? Let me be clear, "not the time to sell" here means for long term investment, not for trading purposes. If you have specific stop loss set up for your stocks, then of course you should always respect it and sell as needed. Personally I don't have stop loss for my long term DRIP stocks and won't sell just because they correct or even crash during the panicky time like today. I may sell some of them if their fundamentals have changed to the worse. DRIP stocks are just like my rental properties that are generating income for me regularly. Actually I should be happy to see a lower price for such stocks as my "rental" (dividend) income will become bigger due to lower share prices. Isn't it great as the rental property owner when your rental income is increasing? Sure for me!!😋
Finally let me leave you with a few excerpts from a New York Times op-ed piece the master investor Buffett wrote in October 2008, as the financial crisis was gathering speed:
The financial world is a mess, both in the United States and abroad... In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So... I've been buying American stocks... Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.
To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense.
These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Let me be clear on one point: I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month - or a year - from now.
What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over...
Over the long term, the stock market news will be good.
In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain.
But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy...
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later.
In waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: "I skate to where the puck is going to be, not to where it has been."
The financial world is a mess, both in the United States and abroad... In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So... I've been buying American stocks... Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.
To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense.
These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Let me be clear on one point: I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month - or a year - from now.
What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over...
Over the long term, the stock market news will be good.
In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain.
But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy...
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later.
In waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: "I skate to where the puck is going to be, not to where it has been."
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