This week we have seen the market move to a new low closing on Friday at 3903.
In August 2011 the market had an intraday low of 3775 but managed to rally back to close closer to 4000 points. So is it time to panic and hit the eject button?
No of course not. To be a successful investor you need to see through the emotional reaction and look at the business you are invested in. In a small business you do not sell or start looking for a job just because profits are down.
Let take a look at Woolworths. The price has fallen around 10% in the last couple of weeks, does this mean that you are not going to buy and food this week or next. Of course not. People will continue to spend at their stores and they will continue to make massive profits. Sure you may spend less and profits might be down slightly but this is simply a sign of tougher times. Long term they will continue to grow and so too will their share price.
What is happening in the US and the UK will have an effect on us but it will certainly not spell the end of the world as we know it. In 5 years all will be forgotten by those who held on and continued to buy while those hit it the eject button will continue to justify their action and continue to suffer because of them.
Just a warning, I do expect to see the market lower, I cannot pick the bottom so I will continue to dollar cost average into the market as I did back in March 2009 and I expect I will reap the benefits.