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KennethY
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Author of Investcraft.com. Investcraft is a Financial Blog that focuses on helping individual investors navigate through the complexities of the stock market. Both individuals hope to provide keen insights on the trends of the market as well as individual stock analysis. If you’re looking for... More
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  • Irrational Fears Causing Market Drops 0 comments
    May 7, 2010 4:30 PM | about stocks: AAPL, KRE, QQQ, SPY
    It’s just ridiculous to see the markets drop the past week. I’m always one to believe that fundamentals and performance of a company, not irrational fears, should be the basis of your investment decisions. Unfortunately, the price swings on the NASDAQ and DOW are ultimately controlled by panick-sellers in the midst of a big drop.

    But fear not, if you’re an investor (not a day-trader), today is the perfect day to jump into the market. I would highly recommend looking at the QQQQ or the SPY as good starting points for investing. KRE (financial ETF) and XRT (retail ETF) are also good investments.

    Today’s job numbers were good and companies continue to beat their estimates and report profits. Companies are starting to hire again and slowly but surely, our economy is turning around. Don’t let those fear-mongering media people make you believe that somehow, Greece’s debt is going to trigger a domino effect where all of Europe’s economy collapses and everyone in Europe will suddenly be poor. That’s just as likely to happen as Apple losing money on it’s iPods.

    You cannot live your life thinking that if you get into a car, you’re going to get into a car wreck or if you fly, the plane will crash. Yes, these things can all happen to anyone at any time in their lives, but risk-taking is an everyday part of life. Investing is no different. If you sell based on some unlikely event like Greece defaulting on it’s debt, then Portugal and Spain, then Germany and France, then the UK, then the rest of Europe, then Europe’s economy collapses, then it somehow hits the US… yes, a chain of events like this MAY happen just like you might win the Lottery someday. (Keep in mind Greece hasn’t even defaulted on it’s debt yet and it’s probably not going to). Ok, if you think this way, you might as well not invest and just put all your money in CD’s forever. As an investor, you need to take calculated risks and today is a GREAT day to take that risk. You get almost any stock today at huge bargains.

    So in times like this, I always encourage people to sit calmly, think carefully about why the market dropped and whether they feel it’s rational. Don’t listen to all those media people creating some hype around the sell-off or making it seem bigger than it really is — they just want to sell a few more newspapers get more eyeballs on them. And don’t listen to those wall-street “gurus” trying to justify or create some reason around why the market sold off — they’re wrong probably just as often as you are — if not more. Just think logically — did anything really change w/ the companies I invested in? In today’s case, probably not since Greece’s debt has almost no impact at all in the U.S. and people got scared and sold because of some suspected computer glitch or some irrational fears about Greece. It has nothing to do with a company reporting less profits or laying off people — none of that happened. In fact, most companies are doing better, reporting more profits, and hiring more…

    Anyways, good luck to all and hopefully, people will come to their senses next week and realize how many great bargains there are in the stock market right now.



    Disclosure: I am long QQQQ and SPY.
    Stocks: AAPL, KRE, QQQ, SPY
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