Why You Shouldn’t Sell Those Stocks
George W. Bush, John McCain, Sarah Palin, Joe Biden and Barack Obama all agree that more government is necessary to correct the already highly-regulated financial industry. They’ve agreed to spend a little under a trillion dollars, regardless of the vast amount of public outcry; Washington and the financial industry are scared silly.
During such an emotional time, it’s easy for us to lose our minds. That’s the worst thing you can do. When it comes to money, your best bet is to rely on your mind through reason and rationality. Using fear in this situation will do nothing but force you along a path of seeing your fears realized — losing your shirt.
And most importantly, don’t dump the money out of your investments because they took a dip. Don’t even do it if you think we’re about to see a 5-10 year “depression” — read below for the reasons.
Look Who’s Buying
Warren Buffet just came out and bought a 5 billion dollar stake in the financial firm Goldman Sachs. That’s five billion dollars he spent buying into the system that other are scrambling to leave.
His investing philosophy is nothing but the most basic, common sense: buy low. Buy a deal. When you see a deal, buy it. If it doesn’t surge in within 12 months, it will within 24. Just make sure you’re buying into a good company that will weather the storm, and you’re good to go.
Unfortunately, most people are completely ignoring what the money mogul is doing, and are just acting on the hype of the media. Whatever you do, remember: the media’s income SOARS during financial rough times. They eat crisis for breakfast. They love it when we become frightened and are glued to the TV sets. There’s a reason they’re encouraging pandemonium.
But to the point: if Buffet is doing it, that’s at least a little evidence that there’s some justification for it rooted in long-forgotten common sense. Of course, you shouldn’t blindly follow Buffet, as brilliant as he might be. The actual justification is found below.
Selling Now Messes Everything Up
If you sell now, you’re guaranteeing that you lose money. That’s a promise. If Wall Street recovers, you’ll know how to make money online. Actually, no you won’t. But pulling out now means you can’t make money with the crisis — it makes your losses concrete and unavoidable. This means you are giving yourself a 100% guarantee that you’ve lost during the crisis. That’s not a guarantee anyone can afford.
And your actions won’t just impact you. No, there’s even more of an impact: the economy gets weaker.
The market gets weaker the more people focus on selling as opposed to buying. Demand drops. Prices drop even more. Value plummets. It’s the old bank-scare — fear literally carves it’s deathly way through the finances of an entire institution, or, in this situation, the nation.
On the other hand, the cheap stocks can help you — but not if you are the one making them cheap. Read below for the why factor.
Don’t Let Current Value Matter
Remember, current value of your stocks don’t matter unless you’re a day trader. Do you buy and sell every day? Are you focusing purely on the short-game? If you’re looking for money in the long-haul, then bailing yourself out now is the worst thing you can possibly do.
Remember, the value of your stocks ONLY impacts your lifestyle when you sell them or when you receive money from them. That’s it. Period. For example:
John buys $10,000 in stocks in Potatoes Inc on a Monday. On Tuesday, the stock market takes a 30% dip. John looks concerned. Five years later, though, the economy is fine, and John finally cashes his stocks in. He had to wait 5 years. But, he didn’t lose his $3,000 that he would have if he’d jumped ship.
Also, he had no negative impacts at all. It was like nothing happened in terms of his lifestyle. Why? Because the value of those stocks didn’t matter when they were low, because he agreed to not sell out of fear. They didn’t matter because he decided to wait — even if it would be a few years. John refused to allow fear to cheat him out of his retirement.
Values WILL Come Back
Wall Street will recover. It might take a year, it might take two — it might even take a decade. If Civilization doesn’t collapse back into Stone Age 2, then Wall Street WILL come back. This means that, if you diversified, you should be just fine. You just have to wait. Patience is a virtue.
During the Great Depression, some people got rich. Read that again — the history books never mention this. Some saw that stock values collapsed, so they took their money from elsewhere, picked companies that would come back after the depression, and put their money in them. They became filthy rich. And you can do the exact same thing.
Want to see a real-life example? We’ve already talked about it — Warren Buffet is going to make billions upon billions because people are scared stiff. Buffet is going back to the basic, basic principle that we’ve heard over, and over and over:
Buy Low.
Sell High.
Settling for anything less will destroy your finances, weaken the economy and help nothing. Don’t abandon your mind during financial hard times. Instead, focus on expanding.
So buy Stocks. They’re cheap. Don’t let fear control your finances.
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The only problem with this is that monetary policy is not taken into full account. If the stocks are only redeemable in US dollars and the currency collapses than we have a much more serious problem. Perhaps some added diversity into the stocks might be good (for example hard commodities to buffer ones self in the case of an economic collapse)
Comment by Justin — October 4, 2008 @ 7:24 pm
Very true, actually — my argument presupposes that the person in question has diversely invested. However, the chances of a complete monetary meltdown now are low. Even then, there will be a “light” at the end of the tunnel, given that our economy’s basic productivity is still going. There aren’t many economic similarities between now and, say, the 1930s.
Comment by Shaun — October 4, 2008 @ 11:13 pm
I wouldn’t dream of selling my stock pick. Mentor Capital (MNTR) is positioned for stock price gains with their 20% interest in Quantum Immunologics, a privately held bio-med company working on marketing their immunotherapy for the treatment of breast cancer. The treatment exposes cancer cells enabling the immune system to detect and fight infected cells. Mentor Capital’s vesting in the company puts them in a position for stock price gains if the treatment goes on the market and becomes a hot commodity.
Comment by mlgreen8753 — September 22, 2009 @ 2:55 am