Last week, the market took the worst dive since 1987. Ahhhhh, yes, 1987. I remember that October day quite well. Black Monday they called it.
I’d been in the market for about a year. I knew nothing about investing, but I trusted my broker. However, when the market went into free-fall, I went into full blown panic.
I called my broker, insisted he sell everything. He begged me not to, insisting the market will go back up…it always does.
I didn’t listen. If I’d stayed put, like he instructed, I’d be a lot richer today.
Yet it was a priceless lesson.Ten years later, in 1997, almost to the day, the market crashed again. Only this time I didn’t see disaster. I saw a sale.
Fast forward to today. I’m not saying you should go on a buying spree. Though it is a sale. But I am imploring you not to sell everything in a panic. Investment decisions, based on emotions, rarely end well.
However, if your nervous system can’t stand the heat, don’t rush out of the kitchen or do anything rash. Take advice from my favorite financial writer, Jason Zweig,
“If you feel you can calm yourself only by ditching some stocks,” he wrote in last Fridays Wall Street Journal, “sell a fixed amount each month for the next year.” By taking small steps, and automating them, you take the emotion out of the decision.
And if you’re going to sell, sell the losers, he advised. “That will turn some of your losses into cash—and a write-off on your taxes.”
Or, instead of selling, “You could direct your dividends into cash, rather than more shares, for now.”
I’d love to hear how you’re reacting to this crazy market? Buying? Selling? Waiting and watching? Or frozen in fear? Leave me a comment below.