Just some very quick food for thought (apologize informality and errors I put this up in a haste): If you are selling out of panic and not because you think your stocks are above their intrinsic value, you should not be investing real money. There are plenty of places where you can invest pretend money. Now you see how hard it is to actually buy when the market is tanking.

I believe that although the vast majority of people on Wall Street are much smarter than me, I have an edge because I can master my emotions. I think a very big factor in being right has to do with being able to master your emotions. In fact, in my opinion this is far more important than being able to analyze stocks (although the later is definately necessary).

If you think this market drop is bad try to remember late 2008 and early 2009. Everyone said I wish I had bought then, but would you? Can you imagine weeks like this continously from September 2008 after Lehman collapsed until January 2009 when the market bottom? I do and bought stocks then, and it was one of the most mentally tasking things I ever had to do. It paid off because I was up about 55% for 09, but it took a massive amount of discipline. I think the vast majority of people cannot master this, not that I have mastered it either, but I was mostly able to persevere, even getting stocks at their very lows in March 09, without using any “market timing” (it doesn’t work anyway).

But the point is not to brag but to point out how hard this is.

See this chart:

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If you think this chart looks bad, look at the one below from late 08-early 09:

 

click to enlarge

If you cannot stomach drops like this you really should not have your money on the line.

Let me end of with a few quotes from Benjamin Graham:

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

“Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble…to give way to hope, fear and greed.”

And this is the most important quote from Benjamin Graham: “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

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