When the market tanks, investors should:
- Have a "shopping list" readily available
- Know when values have fallen to reasonable levels.
Having a shopping list available is crucial when the market tanks. While some stocks get hammered down because they should get hammered down, other stocks can be "babes being thrown out with the bath water." Knowing in advance which potential stocks you want to own is important. When the market sinks, there isn't always time to start an analysis of potential purchases. Like a good boy scout - be prepared. This is similar to why athletes do constant drilling. By drilling, the athlete has fully prepared for situations. Investing is no different.
Second, having done analysis on the potential shopping list stocks provides key information on the metrics of companies you may want to own. Just like buying a car. If you buy a car at the spare of the moment without any analysis, you are highly likely to pay too much, but if you do your homework before stepping on the car lot, you are much more likely to purchase a good value.
That said, stock picks do not always provide immediate feedback. Just because you get a good deal, doesn't mean it can be "cashed in quickly" for a profit. You must be willing to wait - sometimes short periods, but more often much longer periods - even years.
In today's society, we are conditioned to expect immediate results. We buy from Amazon and it comes the next day.. But lots of things do not have immediate results, like careers, relationships and health goals. Stocks are one of those things that expecting immediate gratification can cause real pain.
Getting into a good position is important and, then, be willing to wait. You'll likely never buy at the bottom or sell at the top. So if it's REALATIVELY cheap by good standards, start to build a position. Otherwise, you'll kick yourself when you wait too long and it goes back up.
Be prepared, be well-read and be successful.
