Ahh, last week on one sad day the over all change in my entire stock portfolio was down 2 percent!
While 2 percent might not seem like a lot, it is once you consider that the average gain in an investment account is expected to be 9 percent for the year.
After such a horrible day, you would expect me to be going banana, selling losing stock like they were going out of fashion. To be accurate, if you met me 10 years ago, I would be going bananas and I would be panic selling like the end of the world was upon us. But now, this no longer is part of my behavior, let me explain…
Now I know that if I did my homework and stock analysis correctly, then I should be in stock with legs (meaning the company in questions is a winner). Just because a stock is down on a bad stock market day, doesn’t mean that the stock is worth less, and instead a down day might and should be considered as potentially a great buying opportunity.
After double checking the stock and any associated news, I might even consider buying more of the same stock if it has decreased by a considerable amount. To do this, you must really be sure about the stock and understand its industry (not an easy feat). But if you do understand and believe in the stock, then it might be a great buying opportunity. If I think the overall stock market is high and due for a correction, I might slip into the stock on a small factional basis, since the market might go down some more.
This is why market down turns don’t bother me as much as they did ten years ago, and sometime I even get excited when the market has had such a stumble. In many ways it’s very similar to buying something that you wanted at a store at a big discount! If the next day (after you bought on the stock market dip), the stock goes up or even better breaks even from the dip that happened, well all the better! One never knows if the market will rebound the next day though, and lately the dips seem to happen for a few days in a row, so I don’t rush, but I also don’t rush out!