“The market is like a large movie theater with a small door.” — Nassim Nicholas Taleb, Skin in the Game There is an old saying that experiencing a bull market is similar to riding up an escalator while living through
Using Checklists to Control Emotions During Market Meltdowns
Value investors tend to be philosophical during market meltdowns. “Be greedy when others are fearful and fearful when others are greedy” is well understood as the intellectually sound attitude when markets go haywire. Nevertheless, most of us do not have perfect mastery of our emotions and can quickly get swept up in particularly nasty market routs if we do not decide in advance how we will behave during such events. Read this article for some ideas on taming emotions during market declines.
Coping With Market Meltdowns
In recent weeks, investors have witnessed a dramatic acceleration of greatest bear market meltdown since the Great Depression. The Standard & Poor’s 500 closed at 683.38 today (March 6, 2009), more than 56% lower than the record closing high of 1565.15 on October 9, 2007. This exceeds all of the major bear markets since the 1930s, including the 1973-74 bear market and the dot com meltdown early this decade.
In this type of environment, it is natural for investors to have concern about the safety of their portfolios. Many investors have taken massive losses that are not likely to be recovered soon, if ever. How can investors sleep at night given the massive wealth destruction? Is it possible to determine if the drop in your portfolio is a permanent impairment or if recovery can be expected? Read this post for some advice on the topic.