How not to do it, Enormous Global Panic edition

Retail equity trading volumes have skyrocketed this week, reports the WSJ (paywalled, sadly), as mum-and-dad investors panic about their life savings and stop themselves out at the lows.

This guy doesn’t quite have the hang of “buy low, sell high”:

Andrew Clark, a 30-year old, real-estate consultant in Birmingham, Ala., sold about half of his Apple Inc. stock on Monday morning after it opened 3.2% down. During a client meeting, he missed a brief rally when the stock went up 1.7%.

“I would have bought those back at that point,” Mr. Clark says.

If there’s one thing you take from this blog, aside from “CDOs sold to retail clients are a shameful regulatory failure” and “China’s monetary policy is too damn loose“, please let it be this: don’t do that.

I don’t normally delve into personal finance on here, but it’s worth mentioning at times like this. If you’re trading, with money you can afford to lose, that’s one thing – but if you’re investing, and these are your retirement funds, then selling during a panic is only going to lock in your losses.

If you’re buying for the long-term, then good companies are going cheap right now – 10% or 20% or 30% cheaper than they were a month ago. Buy them now, when they’re cheap; hold them for 20 or 30 or 40 years and pocket the dividends; and by the time you retire you’ll wonder what all the fuss was about.

Bonus, very relevant: this personal-finance cartoon hit the front page of Reddit today. Hilarious and practical!



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