Throwback – What To Do When The Market – Or Your Stock – Crashes?
I originally posted this in February on the blog and thought it was a good time to repost it with the recent market volatility…
Stay safe, stay conservative, be disciplined, and be patient, and all will work out in the end.
Enjoy.
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Sooooo…
Not sure if you noticed but the stock market dropped by more than 1,000 points twice last week – two of the market’s single day point drops ever – and a lot of people are freaking out.
Should you be?
No.
If you have disciplined investment processes you stick to, If you know what you’re doing, and if you own mostly good to great businesses, no you shouldn’t panic.
Or in many cases even do anything.
I answer the original question above in multiple different ways in the 13-minute video below. And I elaborate on these thoughts below the video.
In the video above, you learned why you should almost never panic in these kinds of situations.
Markets rise, markets fall, and in general, the market will continue to rise over time, barring a worldwide economic collapse. And if this happens, we will all have a lot more to worry about than our portfolios.
If you can ignore the market and continue doing disciplined research and you follow your processes for what worked for you in the past, you’ll do fine no matter what the market is doing.
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That is if you can keep your emotions in check.
This is the major potential problem every investor faces when a crash of any kind happens.
Why?
Because if you can’t keep your emotions in check, it doesn’t matter how much knowledge or skill you have as a value investor… If you can’t keep your emotions in check you will fail.
So what can you do about this?
Ignore the news, ignore the panic, stick to your processes, and learn how to control your emotions.
And keep in mind…
Even though most of the headlines said something like “Biggest One Day Crash In The Market’s History”, on a percentage basis these falls aren’t even in the top 20 biggest daily percentage losses. But the media doesn’t say that because it’s not as juicy of a headline.
Am I saying you don’t need to be careful and reassess your portfolio to see if you should sell something or possibly to get more into cash? No.
I’ve said the market is overvalued for the last 5 years and it’s continued to go straight up. And it could continue to go straight up.
Or it could continue to crash…
No one knows when the next crash is going to happen.
If someone tries to tell you they know when the market or stock is going to crash, they’re full of shit and you need to run from them.
All I can tell you is the above…
If you continue to follow your disciplined processes and keep your emotions in check, long-term, you’ll be fine.
In the short-term, your portfolio may get hammered in a crash, but if you’re concentrated on the long-term and are in mostly good to great businesses or cash, you’ll be fine.
Get ready, learn as much as possible, continue to improve every day, and go with the flow like I talk about in the video above.
These are the best things you can do in these kinds of situations.
The WORST thing you can do is panic like the media, make emotional decisions, and watch the news on a minute by minute basis which will make your emotions go even crazier.
In the video above, I mentioned many things I’ve done to get my mind out of the market. Things like learning and improving myself, my businesses, and my team.
What are some things you do to get rid of your emotions when the stock market or a stock you own crashes?
I’d love to hear some of them in the comments below.
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