Investing For Growth
Investing For Growth
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FOOL GLOBAL WIRE LEXINGTON, KY. (December 16) -- After getting crushed again today, the Nasdaq Composite is really making investors nervous. This is readily apparent on our message boards where second-guessing and fear are starting to take hold of investors who are worried about 1987 all over again.
I can't begin to predict whether this is a normal, healthy market correction which will bring the markets down another 5%, 10%, 20%? Or whether it's the start of a bear market. Or even if it's anything at all. And you know what? It doesn't matter that I don't know, because neither does anyone else. I'm just willing to admit that I don't know. Foolish me.
The crucial question is what are you going to do with your real money? Sell everything and wait for things to settle down? Buy more on "the dip"? Go find a warm climate and head to the driving range? (Can you guess which one I'd opt for?)
It's very difficult to maintain a course when everything around you appears threatening, but being disciplined is exactly the move called for when the market turns down. It's easy to be disciplined and stay fully invested during a rising market. And you can feel good about it because you did the right thing. But it's a lot tougher when your portfolio starts heading south.
Yet that's precisely the time you need to be completely unemotional. After you're down 10% - 20%, you're going to want to sell everything and head to a passbook savings account (and many investors will do just that). But typically, that's the absolute worst time to bail out because it's often at the bottom. The stock market has a way of playing on fear, and the only way not to succumb to it is to have a plan, and then stick to it in all situations. If your plan's a good one, it's much easier to stick with it when the market goes against you because you know time is on your side.
Corrections and bear markets tend to be shorter in duration than bull markets, so if you can survive the squalls, your sailboat will provide you many years of happy cruising the rest of the time. So, keep the two rules in mind: Have a plan and stick to it! Stay Foolish.
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