A common investing cliché is that 'the market climbs a wall of worry' – and today might be just another confirmation.
After a poor lead-in session from Wall Street – during which the Dow fell 1.3%, the S&P 500 dropped 1.6% and the Nasdaq lost 2.2% – it seems the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) faithfully took its lead and has responded accordingly.
Just before 2pm AEST, the ASX 200 was down 1.8% and the All Ordinaries (Index: ^AORD) (ASX: XAO) had lost 1.9%.
Only 17 of the ASX 200 companies were showing gains, with Energy World Corporation (ASX: EWC) and Cabcharge (ASX: CAB) leading the gainers, up 3.3% and 2.9% respectively.
In contrast, 18 companies had lost more than 5% in the first 4 hours of trade alone! Included in that list are Energy Resources (ASX: ERA), Ausdrill Limited (ASX: ASL), Ramelius Resources (ASX: RMS) and Decmil Group (ASX: DCG).
Depressing huh?
Well, only if you're not planning to buy shares ever again. As Warren Buffett has recently said:
"The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day's supply."
No-one likes to see their portfolio down at all – let alone by almost 2%. You don't have to like that, but it doesn't mean you should either let it get you down or do anything rash.
If you've chosen your portfolio well, you'll be holding some great companies that are hopefully undervalued (giving good upside) or fairly valued (that you're holding because of the superior business quality).
If not, that's okay too – perhaps it's time to reassess your portfolio.
What you should absolutely not do, however, is panic sell. Instead, Mr. Market has put the market on sale. Stocks are on special compared to Friday's prices. When prices of petrol, clothes or food fall, we rejoice and buy more.
We hope you've got a little cash available for situations such as these – and you should be scouring your watchlist for shares that are on sale today, and acting accordingly if the situation looks attractive.
So rejoice, Fools! Don't buy the line the market (and some commentators) will try to sell you – that would be foolish (you'll notice that's with a lower case 'f').
Be a Fool – don't accept the common wisdom and fight the pessimism. As Buffett would say "you pay a high price for a cheery consensus".
Are you fearful of a coming market crash? Read This Before The Next Market Crash is The Motley Fool's free report. We strongly suggest reading it now might save you thousands of dollars. Click here now to request your free copy, before it's too late.
More reading
- 3 ASX stocks that beat the falling market on Friday
- What your kids desperately need to know about investing
- The devastatingly simple way to play the interest rate cut
Scott Phillips is an investment analyst with The Motley Fool. You can follow him on Twitter @TMFGilla. Take Stock is The Motley Fool Australia's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).
