Thursday, October 09, 2008

The worst thing you can do is panic!

Gulf News' banner headline across the front page today is


It says 'investors suffer another day of bruising body blows to their financial security'

There are quotes from people who've invested in shares in the local market:

"I lost more than Dh400,000"

"I've lost half my investment"

"...put around Dh150,000 of my savings and have now lost more than Dh100,000"

"We went from middle class to poverty...we'll have to resort to begging in the streets"

Half the front page is covered by this.


This kind of nonsense is adding to the panic.

Only if you panic and sell the shares will you lose any money.

If you have a thousand shares in a company and you don't sell them you still have the thousand shares.

You will still receive any dividend the company pays.

If you've bought shares in a solid company you hang on to them, you collect the dividends and you wait because the share price will rise again over time .

Only if you sell them now will you actually lose a large part of your investment.

So don't sell!

Don't take the loss.

Naturally the same applies in reverse. When the share price is rising you don't actually make a profit until you sell them.

In any situation, in any aspect of our lives, the very worst thing we can do is panic.


Grumpy Goat said...

I sympathise with anyone who had planned to retire about now, only to discover that the half the pension fund, and hence pension, has unexpectedly evaporated.

Mars said...

its a good thing i have a lower end 5 figure amount, closer to 4 figures, in the bank saved up. said...

Well, the previous front page headlines were basically the same day in, day out. Markets Crash; Stocks Plummet; Markets Crash Again.

They needed to sensationalize the crisis.

LDU said...

and what if the company goes into liquidation and the major creditors get their cut and you got the little shareholders left with nothing?

Seabee said...

LDU I did say specifically If you've bought shares in a solid company

If investors take a chance with non-bluechip companies there's always the chance of losing their money.

TopesZZ said...

When Sam sneezes, Jack begins to quiver; and Mahmood catches migraine.
This is heralded as the biggest crash since the 1930s - so are we meant to be a privileged and honoured lot to be living in these times? So that, another 80 years hence, circa 2090AD, Hollywood or its successor then, can capture the 'romantically nostalgic moments of yore'' on tube or web or second life?
Did Nostradamus see this coming?
He sure would have had 20-20 foresight.
I had stayed away from posting this historic (sic) epidemic but then, I guess it now warrants a post on: