Weekly Newsletter   Challenge account   Weekly Newsletter   

Buy and hold, sell? Well buy more! How to deal with China Crisis

The futures are down big and Tuesday opening will be another rout as many investors will rush to exit selling their stocks.

If you are one of them, you are making a big mistake.

As I wrote some time ago, you always need to have a plan and remember your trading strategy, but most importantly have your time horizon on mind when rushing towards exit.

If you have 20 or more years ahead there is absolutely no reason for panicking and selling any of your stocks. There is also no need to reducing your contributions to your 401k retirement account or moving it into cash.

A lot of investors are now nervous fearing that we will be repeating 2008 collapse and they panic. But if you didn’t sell your stocks three weeks ago, it is already too late selling now and you will be selling low. And maybe a few days or weeks later you will end up buying back high.

Unfortunately this is what majority if investors or even traders end up doing. Sad.

300x250B Stocks to Buy

It takes a lot of guts to act contrarian in times like this when everything is falling apart around you and talking heads are predicting the end of the world. But that is something, you really want to learn! You want to learn ignoring gut wrenching behavior sitting in front of your computer screen, following every move, get emotional and actually learn to act the right opposite.

It is a long lived market cliché, but it works. When all is red out there, when all people panic out there you want to be buying.

You may have heard that this time it is different and that buying this dip will not work.

It is not different. People are same as they were many years ago and their behavior is always the same. And it is people who participate, behave, and panic in the markets. And so you do not want to get influenced by the crowd hysteria and stay above the herd.

In times like those we are undergoing always look back and see what happened in the past.

In 2008, or 2003, or 1987, the markets collapsed. Yes, it was painful. But how those collapses correlated to your investment strategy and time horizon?

In 2008 the market collapsed from 1500 level (SPX) down to 600 level. Then it took about two years to recover all losses. Two years! And if you were buying dividend stocks, for example, you actually doubled or tripled your money as of today.

If an average collapse and recovery take about two to three years, what is it compared to your 20 year time horizon you have available? And if you do not have that time, you probably do not have such big exposure to the stocks anyway.

Panicking in this market is irrational and wrong. If you are about to do it, you will lose money big way. Instead, calm down, review your available cash (you have some free cash, right?) and start buying some good stocks. But do not use all of your available cash. Buy small, step by step. For example, make a rule that you would buy a small position every Tuesday. Or buy anytime your selected stock drops by a certain percent. You will see, how beneficial your investing will be.

Good luck!

Leave a Reply

Your email address will not be published. Required fields are marked *