Chris B

Nothing Happened - Or Everything

SW & Larry,

Fortunes are made at the highly volatile tops and the highly volatile bottoms. If the stock you bought yesterday drops to half its previous value, it shouldn't matter to you. It was worth yesterday's price or you wouldn't have paid it. You don't have to sell at that price (unless you're leveraged) so you haven't lost anything. Somebody else getting an even better deal is irrelevant. In fact, you gain the option of doing some tax-loss-harvesting and jumping right into another cheap investment.

If you are an investor who has done their homework and not a gambler, you should have the luxury of waiting years for the market to work out its inefficient pricing and reward you. Falling stock markets are good for investors, because they allow us to buy earnings for cheaper than before. Because earnings underly all long term stock appreciation and dividends, we get to buy more future earnings for less money at times like these.

The choice to invest in cash instead of equities is an investment decision too. You're not out. If you sell and the market pops 10% next week, you'll just have to get in at 10% higher. That's a loss. If you never get back in, it's opportunity cost.

Now if you've 63 years old and invested mostly in stocks, perhaps you should have considered your asset balance.