To some, the name of this post may seem a bit odd. With most of the indexes down several percent, and with a huge mid-day swoon by the market, one would think it w a terrible day to be an investor. It is like a gloomy, rainy day that only a frog or a short-seller would love.
Worries over Greek debt were the trigger for the start of a sell-off that was probably already in the cards since the market has climbed 70% or so from the lows of the bear market. Often you’ll find things like this sell-off were ready to happen, much like a pile of cardboard boxes is a fire ready to happen, but the trigger is unpredictable. This is why market timing is so difficult – you know what will happen, just not when.
So why is it a great day? Remember that in the past I’ve said that the market price is just that – what people are willing to pay for a stock right now. It is your choice to sell your shares at that price, or conversely, to buy shares at that price. Sell-offs like this take all stocks down – those of companies that may be troubled by whatever the event it was that triggered the sell-off, and those that will be totally unaffected.
This means that while holders of great companies will be hurt in the near-term along with everyone else, it presents a buying opportunity. Because we are interested in long-term investing, we could care less about what we can sell shares for today. Therefore, we should be happy to be able to snatch up shares at a bargain. Just take a look at what happened to companies like AFLAC during the recession, and what happened once people realized the world wasn’t coming to an end and you’ll see my point.
So use these little falls to buy more shares. Realize that this slide may continue for a while and you will almost never buy at the absolute bottom. Realize also though that if you buy today you will be paying less than you would have before yesterday, and that good companies are going to be worth far more in the distant future than they were either day.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.