As with JFK's assassination, everyone remembers where they were as the tragic events of Sept. 11, 2001, unfolded.
I was asleep. While you're not far off in assuming I'm a lazy lout, this wasn't a case of oversleeping. I had arrived in Japan for my first visit to Asia on Sept. 11 (still Sept. 10 in the U.S.) in the afternoon. After a long journey by bus, I was happy to have found my way to the house and to the prefecture of Gunma, which I would be calling home for 12 out of the next 15 months.
The events of Sept. 11 happened within an hour of my falling asleep, and I first learned what happened 10 hours after most Americans. Being surrounded by people who understood the gravity of what had happened but were far removed from it dulled my personal exposure to the events. I spent a few days digesting online news, trying to understand Japanese TV news, and talking with friends and family, but being on the other side of the world and being fortunate not to have family or friends directly involved in the tragic events of Sept. 11 kept me on the fringes. I knew life was different and that things were going to change, but I wasn't experiencing that change directly.
I found myself with a large project to work on in Japan, a new culture to learn, and all of my same interests to follow. Investing, and what's happening with my investments, is often at the top of that list. I recognize that thinking about investments after a tragedy is shallow, but for me, investing was a part of getting back into my routine and something I had always done to keep my mind occupied with something other than work. Plus, it was clear I wasn't going to be boarding a flight back to the U.S. anytime soon, and speaking next to no Japanese at the time, I had an inordinate amount of time on my hands.
Buying into panic
I was well aware of market history and of the fact that buying during recessions, panics, and other frightening events can be extremely profitable in both the short and long term. I can't say I had determined I was going to start buying stocks on Sept. 17, 2001, when the market reopened, but I was prepared to if opportunities presented themselves with companies I already owned at the time, such as General Electric
At the time I was simply hoping to pick up a few bargains, and within a few weeks, I had picked up shares in E*Trade
However, if I had it to do over again, I would have gone about things in a more focused manner. There are a number of obvious truisms in investing that we often ignore or don't pay enough attention to, but when buying during turbulent markets, these basic points need to be handled with extra care and consideration. A few of these points are highlighted below.
Focus on the companies you already know
The companies most familiar to you probably won't be the ones that fall first or the furthest in a panic, but trying to learn about a new company or industry during stressful periods is difficult, because emotion, uncertainty, and fear rule the scene. An investor's advantage here is a deep level of knowledge and understanding about particular companies, because that knowledge will allow for the endurance to hold and the ability to know whether a company has fundamentally changed and it's time to sell.
Be comfortable with your thesis and the assumptions that back up the thesis
If your assumptions start to fall apart, your thesis and valuation for a company will start to crumble, too. When I invested in eSpeed during October of 2001, I did so because I believed Cantor Fitzgerald would be transitioning much of its business to eSpeed. This was because the casualties sustained by eSpeed and its parent, Cantor Fitzgerald, on Sept. 11 were -- and this is an understatement -- frightening. The company needed to automate and expand its eSpeed business. However, I didn't have a good grasp of the competitive dynamics for eSpeed, and I eventually ended up selling in mid-2003. If I had it to do over again, I might not have purchased eSpeed for this reason.
If you're likely to need the money any time soon, don't invest it
One of the basic rules of investing, which the Fool has preached from the beginning, is not to invest money you might need in the next three years. Panics historically do create some of the best buying opportunities, but it can take a long time before things get better, and they can get much worse before getting better. Knowing that I didn't need access to the money I invested in the next few years made it tolerable to hold through declines and stomach pains caused by fear and doubt.
Your stomach will be doing somersaults
I don't think I can stress this point enough. When things seem to be going crazy and I'm thinking about putting my money to work in a company with a stock price falling like a stone, it's flat-out scary. Even if I know the company cold and know I'm looking at a great opportunity, I often find myself sick to my stomach. There's always the potential that the stock will fall further, and no one likes losing money even if the long-term case is rock-solid. Be prepared for stomachaches.
Being outside of the U.S. on Sept. 11 dulled my comprehension of the event, but as an extremely small fish in a large ocean, I'm sure I wasn't the only investor active in the markets in the aftermath, and I don't believe being far away gave me any sort of advantage as an investor. For example, investors who focused on travel-related stocks such as a few Lodging REITs and understood when things were likely to start getting better earned far better returns as of today, and I'm sure there are other areas that did very well, too.
As investors, we seek and need the aberrations that create the opportunities to build wealth. It's always preferred that these aberrations are caused by economic and business events instead of by external events that take the lives of loved ones. If, like me, you find yourself spending a little too much time on investing, take a step back and spend some time with your friends and family. Investing opportunties will always come along, and there's usually plenty of time to act, but time with family and friends can never be recreated.
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