Panic Selling Done?
If you're reading this, you undoubtedly invest in the stock market. Like me, you've probably been doing a lot of hang wringing lately as markets around the world have been shedding billions seemingly every day.
So you've probably been quite excited about the activity the last couple of days. Two pretty solid days of gains. An obvious bounce, but does it mark the end of the selling? The common belief is that when there's a dip in the market, you need to wait for the panic selling to happen. That is, there's this point when people capitulate and "throw in their cards", selling for no other reason than fear and because everyone else is doing it. Figuring out the exact time of this selling is difficult even for the pros so you better believe that I don't even bother trying.
But with the basic premise of my investing philosophy tied to the belief that in the long run stocks will rise, I use these big dips in the market to add to my holdings. And of course, to inject some objectiveness in to the decision making process of what to buy, I look at my asset allocations. Anything that dips below my pre-determined percentages becomes a candidate. And to keep transaction fees reasonable, I also wait for the amount needed to invest to recalibrate the allocations to equal a minimum of $2000 to $3000. This keeps the transaction fee to below 1%.
And although two days are hardly enough time to assess whether this tactic worked this time around, I'm not worried. Years from now this'll just be a blip on the graph.