Posted by Ryan on February 1st, 2008 in Investment Strategy

Is checking your stock portfolio making you nauseous? The Dow Jones Industrial Average is up 100 points one day, down 300 the next, down again, up a bit, down, down, down. Sounds like the last six months, doesn’t it? My brokerage account is showing shades of red I didn’t know existed, and I want to weep every time I take a peek.

Investor psychology and confidence in the US financial markets has reached its lowest level in at least five years. People are panicking, cashing in their stocks and taking substantial realized losses, and fear is driving investment decisions – not strategy.

The US stock market has been on an incredible five-year bull market that has made amateur investors appear to be amazing stock pickers. We all knew the party would have to come to an end some day, and that party may be now. While my portfolio has taken a massive beating, I am excited about the opportunities being offered. Those who read Looking Forward to a Recession know what I’m talking about.

This is the moment that value investors live for, as they patiently hold their money and wait for the best buying opportunities. As the great Warren Buffett says, “Be fearful when others are greedy, and greedy when others are fearful.” Well, right now the confidence level is extremely low and stock prices are selling at very attractive prices. These market conditions are exactly what I have been waiting for, and I have and will continue to spend money on buying stocks.

I’m not suggesting we have reached a bottom and that this is the end of the market decline. The Dow Jones was down 38% during the last stock market crash between 2000 and 2002. I’m suggesting that stocks are currently selling at very attractive prices and high quality companies can be picked up on the cheap. If the market continues to decline, which I suspect it will, I will be buying even more shares at better prices.

In due time the economy will stabilize and stocks will reach new all-time highs. I plan to be a part of that movement and am doubling up on my contributions in order to take advantage of the stock sale. It may be a rocky road to travel over the next several months, but it will be rewarding for the patient investor that can stick to their plan.

Millionaire Money Habit: Volatility in the stock market is a good thing. If volatility did not exist, stocks would not go up in price. The correction we are experiencing is normal, and presents opportunities for people who have the guts to go against the crowd. Remember Warren Buffett’s suggestion, do not let your emotions get in the way of your investing decisions, and review your investing strategy and stick to it.

You May Also Like:

• Catch a Falling Knife – Buying the Housing Slump
• Looking Forward to a Recession?
• Cash is No Longer King
• The Best Time Ever to Buy Stocks