Remember 70% of all trading is computers now
So another slide headed into the bell for the markets. Nasdaq taking it the worst. Apple, the leader, is not leading today as computers pick the direction and run with it. For perspective, Mr. Market is now run mostly by algorithms that don’t care about a company’s balance sheet, growth, earnings or future. What they do care about is where the stock is headed 25 milliseconds from now so they can try to outrun the other computer sitting next to them.
More then every 2 out of every 3 shares trades are now executed by mindless bot computers. This is good sometimes and bad others. Remember though, it is these same computers that will let you get some incredible offers from Mr. Market offering you cheap stocks. Today’s bargain bin includes Visa, Mastercard and of course Apple. At some point the computers will change direction. Maybe tomorrow, next week or next month. At that point you can choose to sell your shares back to Mr. Market if they run too far or hold on to these great company’s that are creating enormous value both in the short term and the next decade plus.
Keep your eye on the prize which is your portfolio many years out. If things go on sale be consistent and keep buying.
One strategy I use is to never sell. I take this mentality to ensure I not only keep holding but add to my positions if they get cheaper. A cheap stock getting cheaper does not mean something is wrong with the business most of the time. It just means the computers are going in the path of least resistance for the moment. Time fixes this as the remaining 1/3 of market volume eventually finds value and accumulates it.
By not selling I pay no taxes to the government. My positions grow tax free until I decide to sell them. This is one of the most important lessons in investing versus trading. If you are a great trader you will have a difficult time beating an investor who doesn’t have trading fees and short term taxes slashing into gains.
So keep a cool head and pick through the bargain bin today and use this as a chance to start adding. If the market pulls back more just keep adding. This is your greatest weapon and offers maximum protection. Keep buying all the way down. Nobody can stop you from buying as things get cheaper and cheaper. I did this all the way into the 2009 crash as painful as it seemed at the time. My portfolio is up huge by being greedy when everybody else was fearful. Buffett and Graham laid out this simple plan they used. It is easy but takes discipline and fortunately despite almost everyone knowing it probably less then a fraction of 1% actually implement it. This is a good thing as it ensures their formula for success always works.
Happy Investing Today!