Last week, the New York Stock Exchange saw its biggest loss in last ten years, losing up to 10% of its value in just a few days. As an investor, it’s hard not to panic in these moments of great market fluctuations. However, history has shown that timing is not so much important as time is; in other words, often weathering the storm and keeping at it can result in greater gains on the long run. Easier said than done, of course.
So how can you keep calm in these situations? Here are ten pearls of wisdom from some of the top experts and thought leaders in the world:
1.As a general rule in life, it’s important to remember that anyone can fail. Michael Jordan said: “Never think of the consequences of failing for you will always think of a negative result.”
2.Don’t beat yourself up if you make losses, it won’t help the situation. “If your self esteem rises and falls with your trading results, you and your trading are in trouble,” said Ruth Barrons Roosevelt. “Self concept has to be strong and durable and not at the mercy of the current, last, or next trade.”
3.Resist the temptation to throw in the towel. As Thomas Alva Edison stated: “Many of life’s failures are people who did not realize how close they were to success when they gave up.”
4.But still don’t rely too much on passive income from trading because nothing beats hard work: “Every morning I get up and look through the Forbes list of the richest people in America. If I’m not there, I go to work.” (Robert Orden).
5.Don’t wait to try again, there is always an opportunity to invest. “Do not wait: the time will never be ‘just right’. Start where you stand, and work whatever tools you may have at your command and better tools will be found as you go along.” (Napoleon Hill)
6.And don’t wait for the fear to pass eiher. In the words of Susan Jeffers: “There is no point in saying, “When I am no longer afraid, then I will do it.” You’ll be waiting for a long time. The fear is part of the package.” So fear will always be at the back of your head and that’s probably a healthy thing for an investor.
7.Buy during times of low market confidence and remember what Sir John Templeton said: . “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
8.Keep your capital safe by defining a stop level in advance. Bruce Kovner explained: “Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop, and the stop is determined on a technical basis. I never think about other people who may be using the same stop, because the market shouldn’t go there if I am right.”
9.Swimming against the tide, albeit being riskier, can sometimes get the best results. To quote Templeton again: “If you want to have a better performance than the crowd, you must do things differently from the crowd.”
10.And finally a dip is a good time to buy. “The dumbest reason to buy a stock is because it’s going up,” as Warren Buffett said.