An e-mail exchange with a colleague of mine sums it all up perfectly: “Sure, the market may go lower,” he writes, “but the lesson is that people are always doing the opposite thing than what they should be doing.” I know you’ve heard this before — we all have. But no one ever listens while they are in panic mode.

Common sense tells us to buy low and sell high. But with most investors, this is never the case. Many will buy stocks only to see them drop and then sell shares in a panic, no matter how well underlying company might be performing. We’re trapped by our own false sense of urgency — unable to execute sound investing decisions through the panic.

The market is in a tailspin. Now is the time to be cold and calculating, impervious to the panic that surrounds us. If we give in to our short-term fears, we only stand to lose out on long-term opportunities…

Think about the current panic for a moment. There are “players” in the market who are relishing at the opportunity to buy YOUR shares for a lower price. They are quite aware that panic means profits and each tick down means a future of 10 or 100 ticks higher. The only difference is that they have the benefit of discipline.

They look at the indicators that others ignore. They see the pump priming from the Fed. They see insiders buying up shares like they are going out of style. They may be scared too, but unlike the proverbial deer in the headlights, they can put their fears aside and take action. It’s time to step back from the fear and let logic dictate your actions.

Best Regards,
Greg Guenthner
December 5, 2008

Sound Investing Amidst the Market Panic was originally featured in the Penny Sleuth.