{HOW TO PROCEED} When Stocks {DECREASE} (+ {what things to} avoid)

I’m an optimist, but seeing {lots of money} disappear {could be} absolutely frightening. So {following the} latest drop in stocks, I thought I’d share my thoughts here.

if you invest, you’re {likely to} lose money {at some time}. That’s ok-especially when you’re young because time helps mitigate loss {in case you have|for those who have|when you have|should you have} {an excellent} investment.

But ideally, it shouldn’t be happening {frequently}, and when {it can}, it still sucks.

If you’re {concerned about} {your individual} finances, {it is possible to} improve them without even leaving your couch. {Have a look at} my one-size-fits-all advice is dumb.

I went roaming around {to get} some data to prove otherwise, so {have a look at} this Apple graph I took from finance.yahoo.com:

Apple Stock 1985 to 2006 Chart

Apple Stock 1985 to 2006 Chart

Now, let’s just eyeball it. Clearly, the stock {did} very well {within the last} {couple of years} of the graph.

But let’s {consider the} period from 1995-1998, {where} time Apple dropped from about 17 to about 10.

That {is really a} big, big {lack of} about 41%.

But because I cherry-picked this example to prove my point, {I understand} that’s not {the complete} story.

Apple closed at $188, and it’s split twice since that noted low point in 1998.

Now {there are some} {reasons for having} this example:

First {in the event that you} {think} stock-picking {is approximately} {considering} charts and guessing-especially retroactively-then {you will|you are likely to|you will definitely} lose {lots of money} {to be} a moron.

This {is a} superficial analysis {to provide} {a good example}. Second, had you sold when Apple was down, {you’ll} have missed {from} {lots of money}.

If you’re {concerned about} {your individual} finances, {it is possible to} improve them without even leaving your couch. {Have a look at} my here.

“But Ramit,” {in ways}, “{what exactly are} you saying? You told us you lost {lots of money}. So are {you merely} {likely to} let {your cash} sit there? Isn’t this just {a justification} {to be} lazy and overly optimistic {your} stock picks {are actually} good?”

Now, {this can be a} good question.

It’s possible I’m committing {plenty of} cognitive and decision-making errors.

What {you have to|you should} {consider} is, “Are these still good companies and good investments?”

If so, {and you also} have {the chance} tolerance and {time and energy to} ride the storm, great.

If not, {your alternatives} {tend to be more} limited, {which explains why} it pays {to get} earlier. {Actually}, {if you believe|if you feel} {the firms} are good companies, they’re {for sale} {at this time}.

* * *

{I wish to|I would like to} show you {a thing that} hardly anybody knows. It’s research from Standard and Poor’s, the S&P behind the S&P 500.

In 2002, they released an astonishing {discovering that} made most investors’ jaws drop:

During a 10-year period they studied {in the event that you} missed {the very best} days {of this} 10-year period, your returns {will be} cut in astonishing ways.

For example,

    • If you missed {the very best} 5 days {of this} 10-year period, your return {will be} down 22.65%.
    • If you missed {the very best} 10 days, your return {will be} 37.65%
    • And it just gets worse for missing {the very best} 15, 20, and {1 month} of a 10-year period.

Here’s {a fairly} picture:

{Ramifications of} Staying Invested Chart

{Ramifications of} Staying Invested Chart

If {you imagine} you can {find out} exactly when those 10 days will fall in {a decade}, {you then} are much smarter than {I’m}.

Don’t {make an effort to} time {the marketplace}.

But don’t just sit around, either: {In the event that you} suffer {a comparatively} big loss in your portfolio ({what size}? you’ll know when it happens), {it could} {oftimes be} dumb to just saunter around outside {together with your} hands in your pockets, whistling and skipping.

Take some action:

1. I spent {section of} last weekend doing an analysis of my current holdings to see {should they} still meet my investment criteria. (They do, except one company, which I’m {uncertain} I would {spend money on} knowing what {I understand} now.)

2. {EASILY} had properly diversified my investments, I wouldn’t {have already been} hit as hard {when i} was. I’d been meaning to diversify into more non-tech stuff, including international funds, so I’m treating this as a {activate} the ass {to accomplish this}. If you {curently have} stocks, {you are able to do|you can certainly do} this by either adding {additional money} {in various} areas, or shifting current holdings to new areas.

6 weeks to stress-free, no-guilt money management

A better {solution to} {spend time} and energy {would be to} {sit back} one weekend with {an excellent} personal finance book, automate {finances}, and {move ahead} {together with your} life. If you’re {thinking about} learning my exact systems to {manage} your money {and begin} building your wealth, I’d {want to} {give out} {the initial} chapter of my {NY} Times bestselling book, {free}.

You don’t {need to be} perfect {to start out} building wealth {and be} rich. Or the smartest person in {the area}. {Or perhaps a} type-A personality.

In fact, with my six-week program to financial independence, {you can begin} with any {sum of money}, do just 85% of what {I would recommend}, and succeed brilliantly through {memories} and bad.

The advice has helped {a large number of} readers eliminate debt, {enjoy better paychecks} {than ever before}, and live their Rich Life. I’m {offering} {the initial} chapter {free}, just tell me {where you can} send it.

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