Seriously. Right now? With Europe in shambles and our once-proud nation mired in budget deficits, credit downgrades and political infighting?
With unemployment stuck at 8%… and the all-important housing sector, while showing signs of life, still a net drag on the U.S. economic engine and consumer confidence?
And let’s not forget last year’s record stock market volatility. I’m sure you remember what that was like — 68 sessions where the S&P 500 lurched more than 2% within a single day — not to mention 70 days when more than 80% of stocks rose or fell in unison.
I can’t blame investors for wanting to flee the market. We can’t seem to go a day without reading “another Emergency Action Plan” or “Armageddon Survival Guide”—preparing us for everything from the “Death of the Dollar” to the “End of America”
It’s enough to make you want to cash out your 401k, bury gold in the backyard, and start raising chickens and goats. But I have to tell you that if you go “off the grid” now, it will be a decision you’ll regret for years to come.
I’m not saying that there is a major market rally that is set to start tomorrow. There are a lot of pressures on the market and jittery investors are keeping the market depressed. But I can tell you with all certainty that there is money to be made now and throughout the summer if you know what to look for.
Survive the Sell-Off With These 5 Steps
That’s why I’ve put together this five-step system that will make sure you’re fully prepared for any volatility that could come your way. Print out this checklist and post it near your computer so that every time the media rolls out an Armageddon-based headline and you have the urge to sell, you’ll know exactly what to look for before making any major moves.
So, during any period of increased volatility or a temporary market sell-off, I recommend that you take the following five steps:
Step #1: Don’t Panic
I know it sounds like an oversimplification, but panic is a powerful force that will get you in trouble if you let it take over. Panic makes you think that you have to take action—any action—immediately. Panic will cause you to sell stocks prematurely and at their worst prices.
The best thing to do when the market starts to sell off is take a deep breath and quickly move on to step #2.
Step #2: Get to the Truth
The first question you should ask is, “What’s causing the sell-off?” Are your stocks dropping on sector news, global events or economic data? Any of these things could have little to nothing to do with your individual stocks, and joining the crowd by selling without the right information guarantees that you will sell at the wrong time.
Unfortunately, this is the fate of many investors because they don’t adhere to step #1 or #2. They’re in a “shoot first, ask later” mentality that causes them to lose money.
It’s not easy, but you must keep your wits about you and drill down to what’s really going on. Ask yourself, “Is a big company with a bad earnings report causing the market to go down or is some sort of systematic financial problem at play?” If a big-name company gets a downgrade because of supply issues, look at your company and see if the same issues apply and if it is a short-term or long-term impact.
We live in a very connected world, and news travels fast. It wasn’t so long ago when you would check your quotes in the daily paper and call your broker to make buy and sell orders, but nowadays, you just direct your browser to any of the major news sites and, if there’s a major sell-off, it will be right there on the homepage. Knowing the origin of the selling pressure will help you decide what to do next.