Unless you follow the market closely every day, you should have two stock-investing modes – as a holder of stocks and as a purchaser of stocks.
And what about selling? Selling now is not a good idea. The market has lost about 25 percent of its value since it peaked last October. That’s about the average loss during a recession. If we’re not at the bottom, we’re probably near it. The worst you can do is sell when stocks are cheap and buy when they’re expensive. That sounds easy enough… until a series of economic crises cause the markets to fall. In other words, exactly what is happening today. Then investors begin to panic. And panic is followed by selling.
If you are invested in sound companies, they will bounce back. In the meantime, the market’s decline has presented you with a wonderful opportunity. The market is on sale. It’s going for 25 percent off.
As a certain Warren Buffett said (in 1997): “Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”[Ed. Note: A nose-diving economy is nothing to panic about. You can make money in any kind of market just by making smart decisions about where and how to invest. Find a company with good fundamentals, and you’ll be sleeping soundly for years.]