Yesterday’s huge tumble in the stock market has spread fear far and wide among investors, your editor included. But focusing on the here and now isn’t the answer. This too shall pass, but not anytime soon.
What’s a strategic-minded investor to do? Nothing at the moment. If you haven’t been trimming back on risk in your portfolio, now’s not the time to start. Easy to say, tough to do. But investing isn’t easy and panic selling is never the answer. Yes, those are just words and it’s slim comfort when you look at your investments and see only red. But keep in mind that people like Warren Buffett, and institutions like Citigroup and J.P. Morgan have been buying while everyone else is selling. Why? Because they’re looking forward, several years down the road.
We’ll go out on a limb here and predict that the global economy will survive, and in a year or two it’ll be thriving once more. One reason is that there are multiple mechanisms in place to prevent collapse. No, the risk of a deep, systemic failure isn’t zero. And, yes, an asteroid could hit the Earth next week. But for those with a medium/long time horizons, the key question you want to ask yourself: What will you think three years from now looking back?
For the 20 or so years your editor has been writing and investing for his personal account there’s a recurring theme that gnaws: we didn’t take advantage of the calamity. The mind tells us to run when there’s danger, and ride with the crowd when skies are sunny. There’s some logic to that, but left unchecked it leads to mediocrity or worse over time.