Panic has returned to the market.
After hitting all-time highs, the Dow slipped 183 points so far today. The NASDAQ is down about 300, as the S&P sinks about 36 points. Cryptocurrencies are pulling back on Janet Yellen comments. Traders and investors are in panic mode.
If you’re one of those panicking, stop and remember key pointers.
One – Don’t Panic
Easier said than done, right?
But remember — pullbacks are healthy, especially after the rally from a November 2020 low of 26,143 to 31,339 on the Dow. That’s just over a couple months. Pull up a five year chart, and you’ll see the Dow exploded from 16,507 to 31.339. We were overdue.
Two — Have Cash on Hand
“Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent,” says Warren Buffett.
Three – Never Follow the Herd
A trader will often do what a larger group of traders do, so they don’t feel left out of a trend. The rationale is simple. It’s unlikely that such a large group of people can be so wrong. But you know as well as I do, that’s not the case.
Four – Always Be in a Strong Position to Capitalize
As Warren Buffett has often said — keeping some cash on hand allows you to take advantage of corrections without having to sell other investments.
Five — Remember that Markets are Resilient
Don’t let a pullback chase you from the market. Remember, they’re resilient. After some of the most gruesome parts of history, markets have always managed to rally back. This time should be no different. Just don’t let fear force you to do something ridiculous, ok?