Don't Fear The Reaper!



Now I want you to remember something.

No matter who you are, be it a beginner or average or a master level investor, there will be times in the stock market where everything seems to be down. Investors will look at their portfolios and won't like what they see in valuation totals. It happens to all of us, including me. Downturns in the markets happen and they are a natural phenomenon. What is most important is how you personally deal with these market selloffs.

Adding no sanctuary to the mind will be the financial media who will capitalize as much as they can on this negative news, on this negative market, on people's fear. Even worse, mainstream media like CNN and others start getting involved in the fear fray. This way, people who don't watch the financial media and might not realize what's going on will get to know.

As I've said before, these media companies feed on fear because it's great for ratings which means more advertising for them which means more money for them.

Even though their reach is virtually everywhere these days, try to shut out their money-making noise because that is exactly what it is.

For many beginning investors and young people who are experiencing a stock market correction for the first time, it can be fearful to have your portfolio value go down. Note that I'm referring to "investors", which are those people who are buying and holding quality stocks for the long term, versus "trader" who are trying to make profits by flipping any stocks and options by buying and selling or by selling and buying. Most beginning and novice traders often get wiped out during these times because there is no time to recover your positions. But that's a whole other subject - we deal with investing for beginners and novices here.

You need to toss your fear right out the window. Understand that by investing in the stock market, you are accepting a level of risk. Goes with the territory. Even though the stock market has been at all time highs doesn't mean it will keep on making all time highs. Stocks do go down. And when they fall, they fall faster than when they go up.

Remember, a down cycle in the market is natural. It may not seem that way to beginners and young people who might of observed for years that the stock market has done nothing but essentially go up and up and to record levels. But, there have been times in the last 20 years that have looked catastrophic compared to our current down market.

I know because I was in the middle of the action - The Great Recession of 2007-2008, September 11, the Dot.Com bubble bust, and others.

Going back to my younger days, I remember practically begging my multimillionaire clients to stay the course during these rough times, to buy on these tremendous selloffs, to not panic. Sometimes it worked, but sometimes the fear was too much for my investors to handle and they sold off their portfolios at losses no matter what I said or did.

Every single time those markets recovered and the clients who panicked and sold not only lost, but they were afraid to get back into the market after it had start recovering. So, they lost twice. I would feel bad for them, but I did all I could do. Once someone let's emotions take over in their investment thinking, it is very hard to get them to change their mind.

Fear is that absolutely worst thing that an investor can have. Fear leads to panic and panic leads to selling.

Ironically, during these downward times, it is not bad to be a little greedy. If you already own great stocks in your portfolio and they are in a major slump, consider adding to them - but slowly. If you were looking to get into a stock, but it was too expensive at the time, now is your chance. They are great stocks for a reason and chances are they have had setbacks in the past, but they do recover. The recovery may not happen overnight or even in a month , but since you are an investor you have time for your portfolio to recover.

However, for a company that is not so great like your micro-biotech companies that have the ability to go up or down 50% in a single day, the recovery time might take a lot longer or maybe not at all. These are the stocks that many traders brag on the internet chat rooms about making ridiculously amount of money in just days (you won't hear from them when those stocks go bust.)

There are many great stocks out there that are trading anywhere from 10-50% off their 52 week highs from the month of October alone. Many of them are only down because they have followed the rest of the market down. Others have reported wonderful quarterly earnings, but they failed to impress the market so they are down. They too, will follow the general stock market lower. Add them to your stock's shopping list for consideration.

Final thing. If you cannot handle fear, that's ok! But then you should not be investing in any stock.

Know your personal risk tolerance and stick to it with your investment decisions. I've discussed this in detail in my other writings.

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