09 August 2011

Remember Rule No. 1: Don't Panic

As the markets melt down, remember Rule No. 1: Don't Panic! Going along with the herd and selling equities at a time like this is foolish. Personally, not only am I not selling, but I am buying and will continue to do so as prices fall, because equities are like anything else: the lower the price (assuming it's a sound company), the better for you in the long term.

The only scenario in which it makes sense to sell right now is if you honestly, truly believe that the world is coming to an end and stock prices will therefore never, ever recover. Barring that, though, this is the perfect time to buy stocks and I will be doing so aggressively as the slide continues. When the panic stops (and remember, it always does eventually) and stocks begin to recover, I will have taken advantage of buying in at much lower prices, while the herd will have dumped all theirs at the bottom and start buying again at the higher price points.

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