I came home for Thanksgiving break a shaken young man; certain my degree would be worthless. I imagined myself peddling apples door-to-door after college. This was a shame, since I’d painstakingly built up a small stock portfolio.
“I’m out,” I told my dad over the break. “I’m selling all my stocks.”
He looked at me quizzically. He clearly didn’t understand.
“Don’t you see, Dad? We’re in The Great Depression 2.0!”
“Now is the worst time to sell your stocks,” my dad said simply. “Hold onto them, and you’ll be glad you did.”
I held, and I’m glad I did. Fear is a powerful and costly emotion in investing. Take a step back; look at the long-term picture. And when philosophy professors start giving sweeping macroeconomic predictions, take them with a grain of salt.
Joe Tenebruso: I often think back to the days during the depths of the financial crisis, and I remember the feelings of despair, hopelessness, and even anger. But I also remember a light that shined through the darkness, and that was The Motley Fool. While other financial sites were shouting “PANIC” and “CRASH” and mercilessly displaying the blood red color of plunging stock prices, The Fool displayed the word “Opportunity” in bright green letters on the front page of Fool.com.
I remember how this simple, seemingly minor action made such a major difference in my perception of the market forces at play at the time. And this newfound mind-set greatly aided me in gaining the belief that, “This too shall pass.”
Rather than panicking and selling my stocks at the depths of the market crash — as so many fearful investors did at the time — I moved most of my capital into dominant, financially sound businesses such as Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL), and steeled myself with the resolve that I would ride out the financial crisis with my capital invested in some of the strongest businesses in the world. In time, this strategy would form the foundation of my Tier 1 investment philosophy.
Jake Keator: Imagine yourself at the age of 17 with a boatload of cash that you’ve dutifully saved since you first heard of an allowance. Now imagine those hard-earned savings chopped in half. That’s exactly what happened to me when I invested all of my money in August of 2008, one month before Lehman declared bankruptcy.
It was the best thing that could have happened. At the age of 17, a boatload of cash was really just a couple thousand dollars, which was a small price to pay for the most important lesson I’ve ever learned about investing. Did I sell my deflated holdings and take the loss? No, I decided to wait, and the longer I waited, the easier it became to practice the hardest part of a buy-and-hold investment strategy: the holding.
Five years later, I am happy to say that my portfolio recovered, but more importantly, it taught me that investing takes time. There will be more stock market crashes before I retire, but this lesson will carry me through them all and hopefully lead to an actual boatload of cash down the road.
Anders Bylund: You don’t have to see a huge market crash coming before setting up a cash reserve in your retirement account. Some fresh powder in your musket can come in handy at any time, and it doesn’t always make sense to free up capital when you need it by selling stocks.
