Far more important than looking back and thinking coulda-shoulda-woulda is the single rule that will govern my future investing. It's a simple idea. It's also something that most investors and even fund managers violate repeatedly. The single and simple rule is: Have rules and stick to them. It's far tougher than it sounds. I'd swear aloud that I was selling at this price, buying at that price, that I was ready to do this and that when the indexes violated my comfort zone. But I didn't. Greed. Complacency. Disbelief. Patience. Those all factored in. I have a strong spine when it comes to losing, maybe too strong. I resigned myself not to sell.
I believe the absolute worst is out of the way, although I still need to prepare for the absolute worst. I will convert to at least half cash if my portfolio drops to a certain level. If I'm wrong, if I mistime the market, that's OK. It wouldn't be the first time. No one can time the market. What's key is developing your own sound rules based on your goals and sticking to those rules. If you're wrong more than you're right, you need new strategies. If the day after you sell, the market rallies, you can't allow that to get you down. What will get you down is not sticking to your rules. It's discipline that helps make great investors just as discipline helps to make great businesses.
Remember what your mother told you about having patience? (Me neither.) Even if the Nasdaq bottoms, it'll more than likely be skittish for a while; you shouldn't mistake this for the same volatility that marked the Nasdaq during its big bull run. Instead of trying to make your money back in a jiffy, sit back, take a deep breath, and let the market run its course. Instead of panicking, strategize. Look at your portfolio critically, as critically as you ever have. Business model, P/E, revenue growth, cash flow, management, etc. If that's too tricky for you, try this: If there's a company on that list that you couldn't bear to buy more stock in, dump it. I'm displeased to say that I don't think the smaller-cap companies will have an easy time making up their losses. In a troubled market, investors cling to leaders. Even though we've a seen a shoot-the-generals pattern emerge lately, the generals have held up the best. Something to consider.
Chin up. The Nasdaq saw some bad days in '97, '98, and '99, but those were short in our memory when things shaped back up. Our economy is excellent and the Fed is determined to help keep it that way. Although there are no guarantees, in other recent history the market has rebounded from hefty drops. The recovery periods ranged from a few months to about 18 months. Now I can remember what my mother said about patience. It's a virtue.