LAST WEEK we asked on the podcast, “Should We Worry About This Market?” (with Philip Taylor from PTMoney). Investors are spooked by current market conditions (even big time market prognosticator Jim Cramer says current conditions are strange).
Here’s the best headline of all, though, from USA Today: Fear of Wider Sell-Off Grows.
That seems to correlate with the above, doesn’t it? USA Today is just telling us what we already know, from both the podcast AND from Jim Cramer (and probably in that order….).
The funny part of this story?
That headline was from 4/14….over a month ago.
The point?
What did you miss if you panicked?
On April 14th the Dow Jones Industrial Average closed at 16,424. Today it opens at 16,491, up nearly half a percent.
Well, I really didn’t lose anything by getting out….
Sure you did.
Now you’re in a pickle (as my grandma would say back in “the day”). You now have your money out of the market, you’ve lost half a percent (more than you made in cash, by nearly the full half percent) AND the biggest problem:
….you have to decide where to go from here.
Every month someone is worrying whether you should just pull your money out of the market. If they aren’t saying it, headlines certainly insinuate that you should. Hedge fund managers saying it’s “nervous time” (we explain on the podcast) don’t help the confidence of everyday investors.
So What Do You Do?
Here’s what I’d do:
–      Start with an investment policy statement. If you don’t have one, we’ll explain how to create one next Tuesday.
–      In your IPS, decide on an exit strategy for your money. When is too much loss too much? We’ll tackle that next Thursday.
–      Never make all or nothing moves. If you’re going to begin to exit a market, always do it over a period of days. Sure, you might lose a little more if the market continues to crumble, but if it rebounds, you won’t find yourself completely out the market, having sold in a panic.
The Point?
You’ve heard it before (from me) a thousand times: big moves often equal big losses. By creating an exit strategy (and better yet, an overall investment policy statement), you’ll have something to lean on when the hurricanes hit your portfolio.
Wondering which investments to begin with? My friend Matt at Mom and Dad Money covers this topic very well: The Beginner’s Guide to Index Investing
You know at some point bad news is coming….and it most definitely IS coming….but what’s your plan?
Photo: Â star5112
What I feel while leaving a market is to have a Stop Loss mark. On the basis of technical charts, we can have a Stop Loss. In such panic situations first I look at all the fundamentals and what’s happening to them. Then I turn to the technicals. I chalk out my Resistances and Supports and follow them strictly. As you rightly said, “If you’re going to begin to exit a market, always do it over a period of days.”. Yes, in panic situations I exactly follow this strategy. With every breaking of supports I sell some of the stocks. If the market rebounds back before my Stop Loss, I generally stay invested in the market even if it is very less compared to what I was originally invested in.
Financial Consultant at https://www.cornertrader.ch/en/trading-products-prices/fx-options/