You're Crazy To Sell Your Stocks In A Down Market

The reality is that it hurts to see your portfolio value take a tumble. Even the most hardened, seasoned investor is going to more than cringe a bit at the sight of declining values. But the one thing I always stress, and the one thing I think everyone invested in the markets should bear in mind with absolution is that the markets always come back. What's more, the markets also tend to come back higher than where they left off before the tumble.

The key for me is not in what is happening in the micro. But what is bound to happen in the macro. I buy companies for a reason, and that is that I think the companies are worth more than what their current share prices are. I am buying the future valuation of the company as I see it. Not the near term valuation. The reality is that the future is sometimes hard to see when everything else in the near term seems to be a mess. When the entire markets are taking a spill, the future is going to be even harder to grasp when it comes to any given stock, but you still have to see beyond that. You have to see the macro.

When the markets tumble this is effectively putting stocks on sale. If it happens to be a solid company. And of course you buy it because you believe it truly is a solid company. Unless the future fundamentals of the company are falling with the markets, there is no reason to sell. In fact, there is an even bigger reason to buy more in the selloff.

About eight years ago when the markets took their biggest hit since the infamous Crash of 1929, it was damned painful to watch. There were more than a few occasions when I thought to myself, this is it. We're done. The markets are done and I will never see my money ever again.

I could not have been more wrong. And luckily there was another side of me that knew, despite the grand mess before my eyes, that I was indeed wrong. The markets would come back. The money would not be lost forever. In fact, what was before my eyes was a terrifying mess of epic proportions, but it was also a major opportunity to make money I never could have made had the mess not happened.

I bought all the way down despite my better judgment. And I also bought all the way back up. What I did essentially was try and forget about the rotten, empty pit in my stomach and just keep on doing what I always did. Find good companies to buy whose fundamentals looked strong for their future.

...and then wait.

Stock Market Correction No Big Deal

Without a doubt there are more than a few investors clutching at their hair and ripping it out in painful clumps at the sight of the DOW which has plummeted more than 800 points in just two days. And of course other indexes are falling handily as well.

For those who have no hair, they may just be tearing their eyeballs out.

I don't mean to make total light of the situation. It is painful for anyone to watch their portfolios lose hard earned cash. I don't like it anymore than anyone else. But these things are also inevitable, especially since the stock market has done extremely well for at least the last four or more years. At some point things simply have to turn back to a bit of reality. And the reality is that the markets are and were largely overbought.

And really, the selloffs in the markets are really due to panic, not necessarily sound financials. Earnings reports have not been that bad folks.

There is the issue with China devaluing their currency. There is the issue of the recent Greek crisis and the question as to whether or not Greece is really out of the woods. There is unrest with regard to Iran, and the entire Middle East. There is an upcoming potential change of characters in the political world. And there was a recent pull back in jobs data, and of course there is talk of the Fed upping interest rates.

So I get the unease.

But time and time again markets have fallen and risen back up, and then some. And I see no reason why this would not be more of the same. This is normal for the markets to do this, and because it does happen I always say it is a good idea to buy into the upswings in the markets, but leave enough cash behind so that when the markets lose their tailwind you can buy into the panic and cash in on the other end of it.

Investors are on a selling frenzy. As for me, I will be bargain hunting. Now is the time to buy. Not panic. The stock market correction hurts. But really it is no big deal. But it is a potentially big opportunity. Opportunities like this don't come around often. This opportunity has taken four long years to come around. I say pounce on it.