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March 4, 2022
One of the worst things you can do right now is run from the market.
Instead, do what Warren Buffett has often advised.
One, make sure you have cash on hand.
Having cash on hand is one of the smartest moves in the market.
Plus, as noted by The Motley Fool:
“Over the years, Buffett has capitalized on many a market crash by stashing cash and buying low. While Buffett is often criticized for his massive “cash pile,” which is thought to deliver no value to shareholders, the truth is that this cash is crucial to Buffett’s entire strategy. By keeping money in cash and equivalents, Buffett is able to buy the dip when the time is right. Over the years, this has helped him accumulate a massive fortune.”
Two, never follow the herd.
The herd will lead you right off the cliff.
The thinking with the herd is you should follow them. If so many people are doing it, it must be right, right? No. It’s the same as jumping off a bridge because everyone else is doing it.
Make an informed, educated decision and make your move.
Here’s the perfect example.
In 2009, Kiplinger’s article, “Don’t Trust the Crowd” found:
What’s scary about the herd mentality is how insidiously it gets you to see things differently. In fact, a recent experiment showed that we may actually be hard-wired to believe what the crowd tells us. In the experiment, conducted at Emory University, participants were asked to look at an object (an assemblage of cubes) and then judge how it would look if it were rotated slightly.
But there was a twist: Other participants–who in reality were actors hired for the experiment–were instructed to give wrong answers in an attempt to sway the opinions of their fellow participants.
Sure enough, the real subjects, influenced by the actors, gave incorrect responses, despite what their own eyes told them. Brain scans found that participants didn’t just decide to go along with the crowd. Instead, the crowd’s opinion actually changed their perception of the problem. Participants “saw” the objects differently. The herd, it seems, alters our perception of reality.
Three, be ready to buy the dip.
We have to remember that markets are resilient.
Even in the worst of times, markets have bounced back beautifully. By exiting the market on fear, you could miss that.
Plus, use excessive fear to your advantage, as billionaires have.
As Warren Buffett would say, “Be fearful when others are greedy and greedy when others are fearful.” Or, as Sir John Templeton would say, “Buy at the point of maximum pessimism.”
The Dow is down 185 points to 33,553
The S&P 500 is down 22 points to 4,338.25
The NASDAQ is down 52 points to 13,979.25
Gold prices are up $7.63 to $1,944.31
Bitcoin is down 3.6% to $41,676.59
Oil prices are up another $2.54 to $110.20
The VIX is up another 2.56 points to 33.30
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