Ever since starting my dividend portfolio earlier this year, I have been more aware of just how prevalent certain companies are in our lives and have on multiple occasions commented to the family that we own that company’s stock.
In addition, I have made it a habit to pay more attention to the products and services that we use on a regular basis as some companies–primarily in the consumer staples and consumer discretionary sectors based on my experience–have a multitude of brands under their umbrella.
Earlier today I was sipping on a Sparkling Ice flavored water and was inspecting the bottle, where the following caught my eye:
As in life, chill for best results.
While the company in question, Talking Rain Beverage Company, is a private company and therefore not owned by one of my existing holdings, the quote really rang true to me.
Particularly in light of the volatility we have seen in the market recently.
Chill For Best Results
Over the last week or two, I have seen quite a few people on Twitter or in Facebook groups that seem to be extremely anxious when the market has dropped by 1-2% in a given day.
“What the heck is happening to XYZ?”
“I don’t see any news, why is ABC dropping?”
“QRS is down since I bought it. Should I sell?”
In both good markets and bad–although I would probably say it is even more important when things are getting dicey–it is important to chill for the best results.
Before investing into the stock market, you should hopefully have devised a strategy that you would be following. When the stock market declines and people begin to panic, it is critical that you remain true to your strategy. Don’t panic and sell your holdings simply because the market has declined and you’re feeling inundated with headlines and stories of doom and gloom.
Now, that isn’t to say that you should just blindly follow your strategy as it is okay to reevaluate your strategy and adjust as necessary.
But don’t panic.
Chill for best results.
Maintain a level head and continue to evaluate your holdings. Unless a company has had a significant change to their business and/or fundamentals, declining prices can be a great buying opportunity as opposed to a time to sell.
Make no mistake, there will be times to sell a holding as well. However, it is important that you are making those decisions rationally and in alignment with your strategy and not as a reaction, or more aptly an over-reaction, to the market headlines.
Things May Get Ugly
Based on the reactions that I have seen across social media with the recent volatility, I will admit that it has caused me some concern on just how bad the next bear market may be.
It is easy to say that you will not panic and that you will continue to hold in a down market. However, saying it and doing it are two different things entirely–and part of my concern is that there is a large number of people that are investing today that may not have been investing, or had minimal funds invested, during the Great Recession.
When you see your account value drop by $15k, $20k, $25k or more in a single day, will you have the resolve to remain true to your strategy?
I am hopeful that more people are able to say yes to that last question, however informally measuring the responses after a 1-2% drop in a day leads me to believe that I might be too optimistic on that front.
The one thing that I would like to leave you with is to resist the tendency to succumb to panic and uncertainty.
Things may get rather ugly and you may lose significant amounts of value in your portfolio, and despite history not being a guarantee of the future, we have seen that the stock market has demonstrated a repeated resiliency to not only recover but continue to increase.
Over the weekend I saw a post proclaiming that the next bear market would lead to the demise of the world market and all currencies as we know them today, and people would lose everything.
Could it happen? Well, I suppose anything could happen.
However, my advice would be to chill for best results.