Crash! Sell? Don't panic! Do nothing!
Stick to your long-term buy'n'hold strategy!
By Dr. Paul B. Farrell, CBS MarketWatch
Last Update: 3:19 PM ET Apr 4, 2000 Mutual Understanding
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LOS ANGELES (CBS.MW) -- Okay you new breed do-it-yourself investors, you Zen students, you investing bootcamp recruits everywhere.
The moment of truth hit. Like a bomb. A terrorist attack.
Were you ready? You should be. Believe. Trust yourself.
"Don't get caught up in the mass hysteria."
Jack Schwager
New Market
Wizards
How tough are you? How principled are you? How much do you really believe in what you've been saying the past couple years about staying centered in a long-term, buy and hold do-it-yourself approach to investing?
Are you confused? Did panic set in? Think about running? About selling all those bubbly tech stocks and funds that made you triple-digits last year? The ones that had you on the way to being a millionaire planning for early retirement? Are you going to panic and take huge losses now?
Or stop. Do nothing. Just stop. Wait. Stop and realize that this is temporary. This too will pass. Remember what you've heard so many times from the long-term leaders:
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CBS.MW front page
Updated:
4/15/2000 12:25:40 PM
Morningstar research warns us that investors buy and sell at the wrong times. In dips, corrections, and crashes, investors panic and sell. Don't fall into this trap.
Jack Schwager, author, New Market Wizards, "Don't get caught up in mass hysteria. By the time a story is making the cover of the national periodicals, the trend is probably near the end." So for you, it's already too late. Sit tight.
John Templeton, founder of Templeton Funds. "Buy when pessimism is at its maximum, sell when optimism is at its maximum. Therefore, buy what most investors are selling."
William O'Neil, Investors Business Daily publisher: "In the last 100 years we have had more than 25 bear market slumps (natural, normal corrections of the previous bull market advance) and every single time the market recovered and ultimately soared into new high ground. That?s fantastic. It?s one of the greatest success stories in the world."
What's going on? The institutional investors are panicking. Don't you. Believe in your fundamental, long-term, buy'n'hold strategy. Stay the course. Back in January we wrote a column anticipating this moment, "Crash proof a portfolio: Do nothing." In it I outlined ten basic rules to help you prepare for the next correction, the next crash, the next sustained bear market, and now that it's here, the same ten rules apply:
1. Do nothing
2. Don't panic
3. Never, never time the market
4. Remember, daytraders die broke
5. Diversify your portfolio
6. Keep tech holdings under 15 percent
7. And Internet holdings under 5 percent
8. Buy and hold long-term winners
9. Trust yourself
10. Lighten up, there are more important things in life
And now here's one more -- for the moment:
11. This too shall pass
To paraphrase Schwager, "Do not get caught up in mass hysteria of this technology market correction.. By the time this story gets analyzed to death by the national press and media, the trend is over and it is too late to do anything anyway!" You are a long-term, buy'n'hold investor. Believe it. Trust yourself. This is the test! The moment of truth.
Do nothing!
Take the kids to soccer. Go to a movie, the new DreamWorks movie, Eldorado. Or take the family out to a nice restaurant for dinner and celebrate what's really important in life, crash or no crash. Whatever you do, turn off CNBC and CNN tonight. No more anxiety! Remember rule #10, lighten up. If you want to watch television, catch "Third Rock From The Sun!" Good laughs. Besides, doesn't the Nasdaq kinda remind you of that silly "Third Rock" humor? Like we're on the "Third Rock" folks! I guarantee you laughing and dinner with the family will make you a better investor for the long-term than today's breaking news on CNBC.
Paul B. Farrell is the author of "The Winning Portfolio" and three books on online investing. Dr. Farrell was executive vice president of the Financial News Network and an investment banker with Morgan Stanley. He has a Ph.D. in psychology and a Juris Doctor. Dr. Paul's prior columns |
