Market Tanks, Life Goes On…

At least, that's how the headlines should've read.

So last week the stock market to a nice hit on the chin after the Asian market corrected itself (read: collected on some its profits.) However, it should be noted that although we saw the greatest fall in the US markets since September 11, it shouldn't really startle the average investor because it really doesn't matter in the long run (5-10 years). So the markets had a big drop, but we're still well above the "record high 12000" milestone people are always talking about (as if the economy-driven market indices are expected to simply stay within some arbitrary number range).

The stock market will be fine. All the Big Boys know that, and even most media outlets know that, but you know how news shows are with their 24-hour news cycles and quests for ratings. Let's not get started on them.

It's important to resist the urge to panic when the market slips—it's difficult to not follow the Crowd. Back in 2005, gas prices spiked in Georgia and other areas because of expected "shortages" and people lost their minds, pulling into gas stations and topping off nearly-filled tanks with gas priced well north of $5/gallon "just in case." Others were unfortunately low on gas and angrily filled their tanks at the inflated prices, arguing "What if there's no gas on Monday?" (There was). Consumers screamed about price gouging. Businesses screamed about having no to gas to sell.

Looking back, it seemed pretty silly, did it not?

The main point, of course is that it's important to find an investment strategy, and stick to it. Trading stocks every day/week is not a good idea. With commissions and capital gains taxes with for you every time you trade, it's much better to buy stock in sound companies with focused income-producing strategies and hold on to them until the company moves in a way that is outside your investment objectives. Granted, it's not going to work every time, but it will more often than not.

Overall, just be patient, and resist the urge to move when the financial media says the bottom has fallen out of the market. Generally, they're usually just wrong.

For more information, check out this fool.com article on the importance of patience and being rational when the stock market experiences dips and rises.

Let me know what you think about our topic this week. Should you move when the big guys do? I mean, they do have degrees and are your "ear on the ground" as market traders. Or should you fly above the fray and take a long-term approach? I support the latter. Comment below!