In my previous life as a money manager, I had a few nervous clients who would cut and run at the first sign of danger. And then kick themselves for months afterward.
One day nearly 30 years ago, I got a panicky call from one of them.
With the market down big for the day, he wanted me to liquidate his entire portfolio starting with one of his biggest gainers: McDonald's (NYSE: MCD).
"I'm not sure you want to do that," I told him. "Remember what happened last time? You realized you acted emotionally not rationally."
"I just can't stand the thought of it falling any further," he insisted.
"Where are you right now?" I asked.
He told me he was in his car downtown.
I suggested he drive to the nearest McDonald's, go inside and look around.
"Why?" he asked.
"Just do it," I said.
A few minutes later, he called me back.
"I don't know what I was thinking," he confessed. "The parking lot is full, like always. There are lines at the registers, like always. And those registers are filling up with money! Don't sell my shares. Don't sell any of my shares."
He realized the day's share price fluctuations had nothing to do with the company's fundamentals.
That's not always the case, of course. Sometimes a firm's shares are down because the business outlook has taken a change for the worse.
But even then, it's often temporary.
Investors who have held McDonald's for a long time are certainly glad they did.
One hundred shares bought at $22.50 on the IPO in 1965 are worth more than $16.6 million today. (In addition, you would be receiving a quarterly dividend that amounts to over $383,000 a year.)
And this is just McDonald's, not some cutting-edge genetics company.
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