Number Six Rule for Selling an Investment: DON’T PANIC SELL!
If you didn’t notice it, the first five rules all are based on a strategy. The last rule applies to all investments. It is especially needful to remember rule six when the market reacts strongly to negative news like the recent fears surrounding the coronavirus. Here is what the market thought today: The Dow Jones Industrial average was down 3.55%. The S&P 500 was down 3.35%. The NASDAQ was down a whopping 3.71%. Fear and uncertainty caused dramatic selling pressure. Don’t panic sell. I repeat, don’t panic. What did I do? Read on….and don’t miss the final point at the end.
What did I do today? I sold nothing. I bought more shares of some companies and ETFs we already own. This included shares of ETFs for our grandchildren’s UTMA accounts. Here are some things that are not strategies, so I don’t do them:
If you missed the previous five rules, here they are. Some might say that rule number three is applicable to the recent panic associated with the coronavirus. The problem is that you can’t sell before others panic. They already have panicked, so the best you could do is join in their panic.
One final thought before I conclude this post. On a day when most of the indices were down by more than 3%, our accounts were only down 2.3%. This is not uncommon. I wasn’t surprised by the fact that I beat the S&P 500 by at least 1.0%. Here is why: If you buy good dividend-paying stocks and ETFs and especially good stocks with growing dividends, those who own them don’t rush to sell. Furthermore, those boring dividend-paying utility stocks tend to weather a crisis better than the stocks of financial, health care and technology companies. Patience, not panic, is the best approach.