Recently the stock market has been on a roller coaster ride, the markets go down, up and then down again. Should you buy/sell your investments (stocks, mutual funds, ETFs, bonds) or panic? Don’t panic! In the short-term markets fluctuate, this is normal. Here what you should do….
Don’t panic, it’s not the end of the world, though the news media may want you to think otherwise. Remember bad news sells more papers, and increases TV news ratings. The news media lives off of advertising (radio, tv, paper, online), so it is in their best interest to publish headlines like:
“Debt crisis, will destroy economy”
“Government may run out of money in a week!”
“Depression heading our way!”
“Cost of living too high, another recession may follow”
“Shares plunge as bankruptcy fears escalate”
Remain calm, and filter out all the media noise. The economy will continue, history is full of recessions, wars, conflicts, and bankruptcies. As long as you’ve invested in quality companies when they were undervalued, in the long-run your investments will do fine.
What about selling your investments now? Selling when markets are low is exactly the wrong time to get rid of your quality investments. It’s funny the stock market is the only place in the world where people buy more when pricing are rising and start to sell when prices are dropping. Remember you want to buy low and sell high. Do not sell when markets are low, because you will incur losses. You really only lose money or make money when you sell. Holding on to a stock when its share price has dropped 10% does not cost you anything, if you don’t sell. There is a big difference between losses on paper and actual losses.
Should you be buying investments then? That depends on what you buy. It is important to buy quality stocks when they are undervalued. Not all stocks will be undervalued when markets decline. Focus on profitable companies, market leaders, and companies with a long-term history of paying increasing dividends. Watch my free webinar to learn when a company is undervalued.
Stick to the value investing strategy (buy quality companies when they are undervalued), don’t jump from one strategy to the next, and avoid the media noise, and you will do very well for yourself.
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