The sky is falling!
Stop. To steal a line from Cameron Crowe's 1989 Say Anything: "You must chill. You must chill."
Yes, I understand that pretty much every market average fell more than 2% yesterday. I get it. Netflix
Yet if you're reading this, it means I'm still typing. I haven't jumped out any windows. (Not that it would help matters any. I'm on the ground floor.) That sort of dramatic overreaction doesn't help. Panicking as your stocks plummet won't slow their fall, and it won't salvage your portfolio -- it'll just lock in your losses.
Well, what should we do?
You should thank the good Lord (or your deity of choice) for days like Tuesday, for providing you an object lesson in the volatility of the markets.
From time to time, we all need to be reminded that asset prices can go down as well as up. Otherwise, we might do something stupid -- like, say, pay around 100 times forward earnings for a share of First Solar
Hypothetically speaking, and present company excluded, of course.
No, no -- what should we do about the stock market?
Oh, right. Well, just keep on doing what you've been doing. I did say "present company excluded," right? So keep collecting and depositing your paychecks. Keep researching high-quality, low-priced stocks. Keep buying shares at a significant margin of safety. And, as always, keep purchasing no more of any given stock than you can afford to lose. (Because, after all, we all make mistakes from time to time.)
Once you've got that down, though, it's time to get greedy.
Greed is good
See the opening lines of this column up above? A lot of investors are saying things like that right now. Even the pros are panicking. The hedge-fund types? They're worrying about making their quarterly numbers, and they're selling out of positions they love, in a frantic attempt to staunch the bleeding.
Meanwhile, you should consult your stock "wish list" -- you've drawn one up, right? -- and see whether the panic selling has pushed any of your favorite stocks down below your hoped-for buy-in price. Today just might be your lucky day.
In short, while the so-called Wall Street Wise are busy selling their favorite stocks, you should be marshalling your pennies, updating your buy list, and deciding how far ExxonMobil
Further fearless Foolishness:
This article was originally published on July 26, 2007. It has been updated.