Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Thursday, March 17, 2011

It’s Not the Time to Panic

We’ve seen the market drop significantly the last two days on fears the nuclear radiation problem in Japan may worsen. It’s certainly a concern to all. On top of that we have many other things to worry about, including our economy, rising U.S. Debt, problems in the Middle East and more.

Nevertheless, the Japanese are resourceful, resilient people. Trouble may remain in the short-term, but long term we can expect they will rise to the occasion and come back strong. The other issues we expect will work themselves out as well. We’ll continue to see ups and downs in the market. More problems will come and go.

There’s a lesson to learn, however, if you have been thinking about getting out of the market the last couple of days, either partially or entirely. If you have been thinking it’s time to sell, it may be an indication that you either should not be in the market at all or that you have too much invested in the market.

Smart investors look at market downturns as opportunities to buy. They buy low and sell high. What we call “typical investors”, tend to buy high and sell low, as they let their emotions drive their investing actions. We wouldn’t be surprised to see a big jump in the market in the next few days as investors look to the long-term and see the drop in prices as an opportunity to buy low.

We’re not recommending everyone go out and buy stocks right now. Whether an individual investor should consider doing that depends on many factors specific to that investor. We certainly could see a further decline in market prices during the coming days and weeks.

The point is, that if you’ve been having trouble sleeping at night because of the recent stock market gyrations, then you need to re-examine your investment strategy (assuming you have one). And, if you aren’t really sure of what you should do, you need to seek some professional help.


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