The Stock Markets Tumble are you Panicking?
What a day in the markets! The TSX in Canada fell $435.90 while the Dow Jones Industrial Average fell $512.76. That’s one day that I’m sure made many people feel sick watching their stocks and/or mutual funds go down the tubes. The markets might and probably will fall tomorrow too. The question is, are you panicking?
I’ll get straight to the point, I own plenty of stocks (many lost ground today) and while it’s never fun to watch the market go against you and see yourself losing money, it’s just paper losses and I’m not panicking. You need to be optimistic. With this downfall and emotion driven market, there’s opportunity.
Where there’s fear, there’s opportunity
For those that just cannot bear to take on risk, what’s your best line of action? Stay away from the markets or simply use dollar-cost-averaging. Dollar cost averaging is discussed everywhere so do a search on Google or read up my article that I wrote some time ago.
If you can handle taking some risk, then you should be looking at these markets as a buying opportunity. But you need to be very careful with your stock selection; you don’t want to be going after cyclical stocks or penny stocks. At times like this, you want to buy solid stocks that are being hammered not because they are bad stocks but because inventors and traders alike are thinking that the world is coming to an end.
Dividends! Gotta love them
In both the US and Canadian markets there are very solid stocks that are trading at a discount right now because the market is falling severely. The great thing about the current interest rates in both Canada and in the US is that they’re so low that you can afford to borrow and invest and still come out on top with just the dividend payments. This means that you are being paid just to wait for the stock market to recover. Just make sure you know what you’re doing before maxing out your line of credit.
If you are going to buy stocks, stick to the solid companies that are extremely reliable dividend paying companies. You don’t want to take the risk with a company that might halt their dividend payments, imagine what that will do to the stock price. It’s a double whammy.
Be patient and resilient with the stock market
Don’t try to time the market. Think in the longer term and buy stocks that are bound to come back. And don’t put everything you’ve got into the market either, buy slowly and stock up your portfolio of great stocks at discount prices. Don’t think about short term gains, that’s a recipe for disaster always have the longer term goal in mind and you will give yourself a better chance of succeeding.
Also, have a timeframe and selling point for your stocks. This way you won’t get greedy if the stock starts rising and you make solid money. For example, if I buy XYZ stock at $10, I would usually have a time frame set (for example, up to 6 months) and a price of $12.50 (that’s a 25% gain!). When you do this, you become more disciplined, which in turn leads to better investing, results.
Most people are panicking, but you shouldn’t. Just relax, don’t listen to the news and analysts and focus on your longer-term goals. In a few months, this will seem like no big deal and you’ll be doing fine while collecting some nice dividend income in the meantime even if the markets haven’t recovered. Remember, relax and enjoy it!
Tall Man in Board Room in NY 1930 by Foxtongue on Flickr.
