WILL YOU PANIC IN THE NEXT MARKET SELL OFF?
There will be a market selloff…sometime. Its not if, but when. It seems that lately the number of articles being written about such a time have been increasing. As the stock market continues to rise, so do the number of doomsayers that are glad to try to strike fear into the hearts of investors.
Its been such a long time (about 8 years) since there has been any significant market correction that many investors have never even lived through one. So what will they do when the prospect of losing 10% to 40% of their portfolio value started then straight in the face for the first time?
Living Through Corrections Is The Hardest Part Of Stock Investing
Its hard to decide what stocks to buy, when to buy them, and then when to sell them. But honestly, those three pain points are minor when compared to the stress that comes with a market selloff/correction. That’s the time when an investor is really put to the test, the time when the thoughts of losing money almost every day are hard to get out of your mind.
Many investors think they are mentally ready for the next stock selloff. They think they know what they will do. They think they know what their strategy will be: hold on to everything, sell everything, sell just the stocks that they believe are most vulnerable, or something else.
But when push comes to shove and the market sees a 1% or more drop everyday, will they really be able to avoid panicking and keep to the plan? When red numbers dominate every exchange for extended periods of time, will investors really be able to stay calm and stay the course?
Probably not!
After 30 Years, Corrections/Selloffs Are Still Very Tough For Me
I’ve been investing in the stock market for a long time and I’ve been through a few serious market downturns. But honestly, even though I know in my mind that I should just hang on to all my stocks and eventually they will go back up, it is VERY DIFFICULT TO DO!
In a market downturn, watching your stock holdings depreciate every day can make a person sick and that is what leads even the best investors to sell. What you know you should be doing and what you have prepared yourself to do (hold and not sell) is very difficult when its your real money being lost everyday.
What usually happens with me is that I decide to sell about one quarter (or less) of my stocks just because I can’t stand the pain of not locking in some of my gains. It makes me feel better in the short term but then when the market starts going back up, I usually regret selling.
The stock market is great fun in the good times like we have had in the last 8 years with many more up days than down days. But when that serious market correction comes along, which it will, stocks suddenly aren’t fun anymore. Then they become a constant worry and the stress that is caused by a falling market can take its its toll. Thats when people panic and sell. You know you shouldn’t join them but its almost impossible not to!
