Cool Heads Prevail - Old Peak Finance

Cool Heads Prevail

June 22, 2012

2012_cool heads

Cool Heads Prevail

June 22, 2012

We’ve returned to another period of market volatility.  The media is preaching gloom and doom.  It’s tempting to sell stocks to avoid further losses, promising yourself you’ll get back into the market “when it looks safer”.  I urge you to stay calm, tune out the screaming headlines, and take advice from investors with real wisdom.  Below are quotations from four investors who know quite a bit about the subject.

“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” — Sir John Templeton

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” — Warren Buffet

“I’ve found that when the market’s going down and you buy funds wisely, at some point in the future you will be happy. You won’t get there by reading ‘Now is the time to buy.'” — Peter Lynch

“Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble … to give way to hope, fear and greed.” – Benjamin Graham

Unfortunately, most of us react too quickly when news turns bad, and our tendency is to sell.  Selling low — together with its “cousin”, buying high — explains why, over the past 20 years, the average mutual fund investor has under-performed the US market by 4% annually.  Staying the course is hard; few investors can do it.  Over the long-term, those who can, like the four sages quoted above, will do quite well.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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