The title to this post should not make sense, ‘sensible panic’. That does not mean that panic can not be a self fullfilling panic, in which prices do not reflect true value and take years to recover (a secular bear market). Jason Zweig offers some good advice in his recent article on Dealing with a Loss of Control.
Even during the Great Depression, the best investment results were earned not by the people who fled stocks for the safety of bonds and cash, but by those who stepped up and bought stocks and kept buying on the way down. A man named Floyd Odlum made millions of dollars putting his cash into battered stocks. His motto throughout the market nightmare of 1929 to 1932 never changed: ‘There’s a better chance to make money now than ever before.’
During these hard financial times, our investment strategies are pressed since this market crisis looks different than last time (they always have), we are forced to make decisions. Just like Floyd Odlum in the 30s, our behaviors matter. It’s okay to be fearful but not act out of fear, acting sensibly and not in panic is what has prevailed throughout every market cycle.