5% drop in one week

[+ SundayZip]

Ok. Stay calm. B-r-e-a-t-h-e . . . It's only a correction. It's only a correction. It's only a correction.

 

[Nebost]

Remind yourself it is a cycle and it will come back higher than ever , it always does.

 

That graph shows the 2008 crash was so much more severe than 2000. I went through both of them and thought they were about equally awful.

[Decatur Guy]

This is an opportunity if you have the cash and the guts.

[AdamSmith]

Nebost and Decatur echo J.P. Morgan. Whenever he was asked what will the market do, he would reply:

 

"The market will fluctuate."

[Guy Fawkes]

Stick to your portfolio plan!

[jawjateck]

Cash is always a position in my portfolio. I hold it patiently waiting for opportunities. Yesterday was one of those days. I made some spending money.

[AdamSmith]

Cash is always a position in my portfolio.

 

"Well, don't look to me, Dolores. All my money is tied up in cash." -- Vera Donovan, 'Dolores Claiborne'

[Diverdan]

NEVER panic in these market fluctuations. There is a reason that most smart investors the world over invest in the USA, whether it is in stocks or bonds or other investment vehicles. I too have survived previous significant declines, and if I live long enough, I will survive this one too. Trim your credit card spending, tighten your spending habits and enjoy what you have. Even China will have some rebound in the future, as their continued grown in population will produce results if their leadership does not screw it up. The current leadership does not include many who are knowledgeable about free market economies, and their attempts of the past couple of years to go from a controlled economy to a free one are not yet very successful.

[gallahadesquire]

The following points are germane:

 

• Most of us are not that directly involved in China's economy. What happens there, stays there.
  
• This is a CORRECTION. 2008 was the inevitable result of greedy lenders running out of "reasonable" mortgage holders, and looking to squeeze the last drop of blood out of a stone.
  
• The economy is in better shape than in 2008.
  
• YAHOO reported that there are like 5/16 "bearish indicators" this time. In 2008, there were 12/16.
  

Today's rally is probably not the end of the sell off, but there will be some Terrific bargains out there. As Warren Buffet says, Look at the fundamentals. Also, would you include a stock in your portfolio anyway?

[+ SundayZip]

Cash is always a position in my portfolio. I hold it patiently waiting for opportunities. Yesterday was one of those days. I made some spending money.

 

This idea occurs to me every time there's a significant drop in the market. But here's what stops me from holding onto cash.

 

That cash could be earning 7% (inflation adjusted average) if I held it in a broad, US equities based index fund as opposed to cash earning close to zero. It would be different if I knew exactly when the next correction would be, but I don't. The market went 7 years between 1990 and 1997 without a notable correction and during that period, gained on average, 17.5% per year. You could argue that if I had held onto that cash and bought at the bottom of the correction in 1998, I could have made some nice money. But then if I consider the gains that I forfeited during the prior 7 years, I wonder if I would have come out ahead.

 

But then, I'm somewhat of a scaredy cat when it comes to investing and my argument above might be just a flimsy rationalization. The solution for me might be some psychological counseling.

 

http://myquarterlifecoach.com/wp-content/uploads/2015/01/scaredy-cat.jpg

[AdamSmith]

Warren Buffett and his mentor Ben Graham always remind: When others are rushing for the exit is exactly the time to carefully look for opportunities to stroll in.

[jawjateck]

I pay no attention to these talking heads who advise a high percentage of your assets in the U.S. stock market. There are so many asset classes available for our profit. My portfolio allocates 40% to the stock market. Half (20%) is in stocks I hold over a year, usually years. The other half is available for short-term opportunities. Yesterday morning was a panic throughout the entire market, but panics happen routinely in individual stocks, usually around earnings season. So, I'm not waiting just for days like yesterday. I've had numerous buying opportunities this year, and in the past 10 years. The crash of 2008 was very profitable for me, but I make good money every earnings season when scaredy cats puke out quality stocks for no good reason.

 

Well over half of my stock market profits over the past decade have come from seizing upon fear. I'm one of the guys on the other side of the trade when people are desperately selling.

[jawjateck]

Some aspects of the stock market are very predictable. For example, on Sunday I predicted:

 

- futures would be near limit down by Monday's opening bell......check

- investors would dump stocks irrationally and machines running sell programs would add to the pressure.....check

- retail investors would jam the Internet and I would not be able to login to my account......check

 

So Sunday evening, I placed several limit orders to execute on stocks if they hit my price, which was well under Friday's close. 5 trades were executed during the plunge. I sold 3 of them before lunch during the recovery. I sold the other 2 this morning pre-market.

 

Fear is.........profitable.

[gallahadesquire]

 

... But then, I'm somewhat of a scaredy cat when it comes to investing and my argument above might be just a flimsy rationalization. The solution for me might be some psychological counseling.

 

http://myquarterlifecoach.com/wp-content/uploads/2015/01/scaredy-cat.jpg

 

Or get a good Financial Advisor. I've been with mine for 31 years. When he left a brokerage after 32 years, he took 98% of his clients with him.

[+ SundayZip]

There's the ongoing discussion (debate) about active vs passive investing (folks can google "active vs passive investment strategy" to learn more). I personally don't thing there's a right or wrong answer. I got a new financial advisor a couple years ago and during our first meeting he more or less asked me if I preferred to be active or passive. Of course my mind immediately flashes to the rentboy saunas in Rio de Janeiro where a rentboy is likely to ask you, Are you active or passive? (meaning, Are you a top or bottom?) I should have replied to my advisor, "Sorry buddy, you're not my type."

[jawjateck]

Meanwhile.......the market had an ugly afternoon. Glad I took profits this morning. Get ready for another round of selling. I'm making my shopping list now.

[+ sam.fitzpatrick]

Since my retirement date is more than an economic cycle away, I'm OK with the knowledge that things cycle around. I'll probably say this until I go to balance my IRA statement next week.

[Frequentflier]

I accidentally looked at my portfolio today. It was not pretty. But I figure if I survied 2008, I can survive this too.

 

I did too, just hoping this round of downward movement in the market is like 2008 - meaning that it will go back up

[Frequentflier]

This is a good post. You all have the right outlook/plan and maybe if enough people see it they won't do what too many do - see the red numbers on their statements for change in value and sell. So they either repeat the sell low, buy high or sell low and feel so burned they never participate again. You all have years of experience and probably abundant investment portfolios. I wish schools, starting with elementary, would teach the necessity and value of long term investing, compounding, etc. so those of us of modest means are more likely to avoid mistakes made by too many in the past. I'm a finance guy and it's amazing how even a small amount, regularly invested starting when someone is in their early twenties can make someone at least a millionaire by the time they are 60. But I think our society can do better to teach that. I also think social security money should be invested in CD's or federal government obligations only and in each persons name. You can't withdraw it until retirement and our government employees can't steal it!!

[Kevin Slater]

Fascinating chart showing the strong correlation between the Shanghai Composite Index and a map of Virginia:

 

 

Kevin Slater

[+ Charlie]

Does this mean Shanghai is about to drop into the ocean?

[thickornotatall]

And right back up.....roller coaster ride this month.....all my losses were made whole in the last 2 days....stay the course....