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Online Share Trading

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PANIC

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sparrow
Contributor
Is it time to PANIC ? Panic is a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety. The sub prime came and the market dipped and recovered and dipped and went sideways and was factored into the market over and over - we all knew it was there it would not go away. Logic said it was ok and the just when you thought it was all over ....Bam ... being cool cost you. The banking crises is here, its factored in and the market has dipped and dipped and dipped again... logic says we are ok.. p/e's are low and at the level that says we traditionally Ok. We should see some recovery - earnings are still coming through ok. We on solid ground. We should be cool..... but should we be? Will some PANIC help here. Rather than sit in the headlights and act cool some action is required .. maybe Panic is too strong a word as it repaces reasoned logical thinking ... but than so does being stuck in the headlights. I loosened up on half the portfolio - it was sell at the market. I'll sleep easier tonight. Maybe I panicked, but it felt good.
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10 REPLIES 10
Not applicable
sparrow, there's no easy answer to your question. All investors have different risk appetites and investment horizons. What you have done is probably not a bad move on your part because at the very least half of your portfolio now sits in cash. Markets have been really volatile but as you have mentioned based on history, they do eventually recover. The problem is that if the markets pull back severly not all counters would recover quickly which leaves investors either losing alot of their capital or waiting long periods of time for their stocks to recover in value. I've been tempted to do the same as you but having watched the impact of all the bad news on the stocks that I own, most of them have faired pretty well so far. At this stage I am willing to ride it out. I'm mostly exposed to small caps with only one large cap investment (BILLITON) which I will be exiting shortly - took a punt on it a few days ago when it dropped so sharply.
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CHATTYCHAT
Super Contributor
Panic is also emotion - and not a good thing for a trader, I'm told. You did not panic, but developed a strategy and did well for your particular situation. Inv managers with a mandate to invest up to 70% of their prtfolio in equities, are sitting with 45% in equities, higher levels of bonds, up to 25% in cash. Nothing wrong with that. From an investor p o v, I am buying selectively at these levels.
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THRESHOLD
Super Contributor
Years ago - we did the audit for an old layer who had a formidable portfolio. He told me this "Never, ever panic!"
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THRESHOLD
Super Contributor
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Not applicable
Nah boet - I think you have fallen victim to herd mentality. Sure you may have a sleep easy night knowing that you have exited your portfolio - but what if we rally from here? Imagine how bad you are going to feel then! My personal strategy right now is to dump all the risky stocks - those with high debt, and those with dwindling assets or production volumes (i.e. miners on production declines). You should be comfortable with the sustainability of your company. Part 2 - access to credit is, and will remain, a bit of a problem for the forseable future. Expect it to get worse. So if your stock has capital intensive projects in the pipeline - get rid of it, rather pick it up as a growth story. Part 3, make sure you have cash to cost average your good stocks. Buy at every 10% or 20% pull back level. Part 4 - div's are king. Stick with the high yield dividend stocks (defensive). At least you will get something out of a protracted bear market, if it happens. Part 5 - if you are really worried about short to medium term, hedge. Start looking at warrants or CFD shorts on your more volatile portfolio (although you want to hedge on a pull back, rather than at the bottom end of a dip). Part 6 - you gotta believe! Be greedy when every one is fearful, and ignore the mass media
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THRESHOLD
Super Contributor
Precisely - if one keeps selling - they will never follow a story like CAPITEC or SHOPRITE, INVICTA, countless others. A trader must sell. An investor must average in over time and sleep easy. By the time you join the panic, its too late anyway. Sure you will get caught in the odd crash - but crashes are truely rare. You can't invest "for" them.
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THRESHOLD
Super Contributor
Precisely - if one keeps selling - they will never follow a story like CAPITEC or SHOPRITE, INVICTA, countless others. A trader must sell. An investor must average in over time and sleep easy. By the time you join the panic, its too late anyway. Sure you will get caught in the odd crash - but crashes are truely rare. You can't invest "for" them.
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Fredsed
Super Contributor
We dig up diamonds By the score A thousand rubies Sometimes more We don't know what we dig them for We dig dig digga dig dig
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THRESHOLD
Super Contributor
It ain't no trick To get rich quick If you dig dig dig With a shovel or a pick
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partridge
Super Contributor
Please panic - we will benefit
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