Exchanges all over the world plummeted yesterday, after US lawmakers blocked the $700M US bailout. The result was a global plunge in the stock markets. The Dow Jones Industrial average lost a record 748.21 points. The TSX was down as much as 955 points at one point. From Japan and China, all the way to London and Frankfurt, no exchange was safe from the panic stricken exit of the investors. It will definitely be one of those historic days that will be talked about decades later.
How will you remember it?
Will you say it was the day that:
– ruined your retirement, forcing you back to work?
– most of your life savings in mutual funds and stocks were wiped out?
– subsequently made you sell all your stocks at a huge loss, and invest strictly in GICs?
Or will you say it was the day that:
– provided the opportunity of the decade which helped you substantially build your retirement nest egg.
– made you stop sitting on the sidelines and actually head over to the bookstore for a good book on investing.
– you said to yourself you will never miss an opportunity like this again, and started preparing for the next one.
Different people will have different answers that may or may not be similar to the ones I have provided above. However, it is still a question each investor needs to ask themselves. The question why, should follow. Why did you answer one way and not another? By asking these questions, we are able to evaluate ourselves and find areas of improvement. It is also good to ask ourselves, how we think others will remember it. Not only family & friends, but people much smarter than ourselves like Warren Buffet for example. We can them compare why there might be a difference. By comparing the difference we not only pinpoint areas to improve, but improve in a positive direction. [On a side note: Now, you might say no matter how much you improve you could never do what Buffet does. But Buffet himself has been telling investors & shareholders for years that anyone has the ability to do what he does. Now why would such a smart man say something like that? Because it is true. Everyone has the ability to acquire the knowledge & skills, it just the question of if they can find it in themselves to actually go forth and start doing it.]
I asked myself this question years ago after the tech bust. My answer was a combination of the above. I said that most of my life savings in mutual funds & stocks were wiped out. But I also said that I would never miss an opportunity like that again, and started preparing for the next one. There was a lot of things I didn’t know about investing and myself. I needed to improve in many areas (attitude, knowledge, analysis, etc). Through the years I’ve worked hard at improving all areas. And now I’ve been prepared and already started taking advantage of opportunities during the last 12 months. Yesterday’s plunge in the markets may be an opportunity. However, to my disappointment most of my favorite stocks, have not declined enough to make me purchase additional shares. January’s market decline provided much more opportunities for me. But that does not mean in the coming weeks or months opportunities will not show up. I just need to patiently wait. If the opportunity arises, I will purchase, if not, I won’t.
What areas do I need to improve this time?
– Everything I improved last time and then some! Knowledge, attitude, analysis/evaluation, speed, etc. I need to make sure I take advantage of the next large opportunity and anything else in between more efficiently and effectively. Opportunities like this usually come around once every 5-7 years. And because time is always ticking, continual improvements will yield continually improving financial results.
Yesterday, I cracked open another book.
So, sitdown, and think. Then ask yourself how you will remeber that day, and why.
Thanks & Happy Investing!
The Investment Blogger