The S&P has never declined so much in the first week of the year..Ever!
5.96% down in 5 days, is it time to panic?! I say not.
In one of the worst years for investors (The 2008 crash) the S&P 500 was – 5.32% in the first week of the year with the return for the Rest of The Year being -35.03%!! However, not going to air the dirty laundry again as people love to panic and is still fresh in many investors’ minds.. Still, see the below for a spine shiver..
Its not going to be smooth sailing this year
There is a lot of chat about a recession at the moment. Will it happen? Can it happen again? Either way, no matter how diverse your portfolio is, talk of recession and panic sells make everything go down. Its psychology at its finest. Sheep follow sheep. Lets be honest, people can justify with a lot of cases why they are selling..
When a stock trades below their 200 day moving averages, bad things will happen. Only 25% of all S&P 500 stocks are above their 200 Day Moving Average. Pretty scary stuff for investors in America.
Does this mean we should jump ship?
Panic selling is worse than panic buying. The psychology of panic buying is not to miss out, so ultimately you never pile all your money in.
Panic selling is the fear to get a return on your investment, so it happens without much delay and can kill your bottom line. Panic Mode, jump ship. Call it what you like!
For me small movements of buying and selling seem the right thing to do. Do not change your whole portfolio because of one bad week. Everyone knows that happened in the last crash. People lost millions, but also on the other side of the table, some people made even more with astute buying.. Be smart and opportunistic and see this as a time to add value to your portfolio with cheap stocks, and prepare to ride out short term turmoil. The poor first week is not going to cause this..
- Do NOT Panic Sell- Sell sensibly, take a small hit if you deem it necessary, don’t just sell everything
- Can you ride out 5-8% fluctuations in your stable stocks?- If yes, then ride it out and assess once the volatility settles. Thats what I am doing with Aviva
- Look for cheap buys- Has a company been caught up in the general panic, and does it deserve to have decreased in value? If no, assess the strength once the market stabilises.
- Find a steal – I have my eye on 3 potential steals.
I will explain which ones and why I believe they are cheap stocks later on in the week
Happy Mondays by investor friends…
The Young Investor