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Investing Mindset: Panic vs. Opportunity

by Miranda Marquit

When you see several days of steep losses in a short period of time, it can be tempting to switch into panic mode, following the crowd and dumping your stocks. However, panic selling can cause you bigger problems in the long run. Consider that one of the biggest factors in your success as an investor, as well as in other areas of life, is your mindset. Are you letting fear cloud your financial judgment? If so, you could miss out on some of the opportunities provided by a down market.

DON’T PANIC

One of the worst things you can do during times of market volatility is panic. Decisions based on a knee-jerk reaction are usually bad decisions — especially if it means dumping a fundamentally sound stock and locking in your losses. Before you sell due to a market drop, imagine the words “don’t panic” in large friendly letters ;) Step back and think about why you want to sell.  If you want to sell because everyone else is selling, it might be time to adjust your mindset and start looking for opportunities.

Stick to Your Long Term Plan

Now is not the time to abandon your long-term plan. If you have made an investing plan, stick with it — especially if you have a couple decades left before its fruition. When you have a solid investment plan, it is likely to bear you out over the long term. Short term, things can look pretty jagged and volatile. However, if you look at market movements over a period of decades, things tend to smooth out. Long-term, there is a great deal less volatility. This is good news for your long term investing plan. Don’t let today’s fear keep you from reaching your ultimate investing and financial goals.

While this might be a good time to re-evaluate where you stand, and to diagnose some weaknesses in your portfolio or asset allocation, it’s not the time to change everything up just because you’re afraid. Take a measured approach to tweaking your plan, but don’t scrap it completely.

Look for Opportunities

Now might be time to look for opportunities. Cheap stocks abound during times of stock market volatility and times of economic recession. You could pad your retirement account, or enhance your income portfolio. Even beginning investors can benefit by investing in index investments that have a little less risk than some other individual investments.

If you are a little more advanced as an investor, you can look for other opportunities. It might be a good time to buy precious metals, before they skyrocket higher. (Some think that now might be a good time for silver, especially if gold is to rich for your blood right now.) You might also find interesting opportunities in currencies, or other investments. Times when the real estate market is doing poorly might produce opportunities for you to buy cheap property to hold on to for a time. During the last economic recession, freelancers were able to find a number of opportunities as companies looked for skilled workers with lower overhead.

Instead of dwelling on how horrible everything is, you can be on the look out for opportunities in times of market and economic uncertainty.


Published or updated August 14, 2011.
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{ 1 comment… read it below or add one }

1 krantcents

I am sticking with my long term plan and dollar cost averaging into the market.

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