The stock market is crashing and I bought more stock!
On October 10, 2018, at 3:45PM EST, I looked at my account and all I saw was red. All I could ask myself was “what the heck is going on today”. I didn’t know if what was happening was related to the political climate in the U.S. or if something had taken place internationally. I flipped on CNN and Bloomberg and saw, “BREAKING NEWS - STOCK MARKET DOWN 800 POINTS”.
Everyone is panicking and selling out of their positions.
Dow Jones Industrial Average down 831 points (3.15%)
S&P 500 Index down 95 points (3.29%)
NASDAQ down 316 points - the worst day in 7 years (4.44%)
With 15 minutes left in the trading day, there was time to place a few trades, but would that have been the right thing for me to do? Would that have been in line with my investment goals and strategy? When you sell in a down turn, you actually capture the loss. Meaning, you make it real. That sinking feeling of my stomach taking a dive as if I were on a rollercoaster had me second guessing myself. Mike Tyson once said, “Everyone has a plan until they get punched in the face”. Well, October 10th was a punch in the face.
Have a plan before you get in the ring. Write down your goals for making the investment and your exit strategy. Before making investment decisions, especially in volatile markets, make sure the fundamentals of the company that you have invested in or that you plan to invest in remain strong.
Does the company have a significant amount of outstanding debt?
Does the company have cash on hand to pay off debt should the cost of debt become too high?
How is the leadership of the company functioning?
Are there regulatory changes coming down the line that could impact the way the company does business?
These are just some of the questions that you should ask yourself as you make buying and selling decisions.
Sure, it sucks to see dollars vaporize and yes, I would have gladly purchased a beautiful handbag and some shoes with the more than $2,000 that disappeared on Tuesday. For anyone maintaining long positions in the stock market, make sure your time horizon is in line with long-term investing (2+ years). This gives you as the investor time to recoup losses that may come about during the time that you have money invested in the market. Money needed for the short-term should be held in instruments that aren’t subject to volatility like savings accounts, CDs, and money market accounts to name a few alternatives.
As an investor, there are “safeguards” that you can put in place such as stop-limit orders to limit your losses. I actually put stop-limits on a couple of my positions. I intended to do that about a week ago, but didn’t.
Are you a long-term investor or speculating in the short-term. I do a little speculation, but a long-term approach is best. If you’re wondering what I did, I had some money sitting in cash and opted to buy more stock.
Are you a long-term investor or speculating in the short-term. I do a little speculation, but a long-term approach is best. I have attached screen shots showing the one-day performance of my account and the one-year performance. If you’re wondering what I did, I had some money sitting in cash and opted to buy more stock. Think and invest long-term.