Painful though it may be, probably the best course of action is to accept reality and take your losses. Otherwise, how much more can you afford to lose? And how long can you sit this bear market through? If you still don’t believe we’re in the grip of a devastating bear market with more to come, you’re probably going to be in bad shape very soon.
The single biggest reason why people lose in the markets is because they don’t like cutting losses. It’s a psychological thing…you feel as if there is still hope as long as you hang on in there. As the market goes deeper and deeper against them, people freeze like deer in the headlamp and turn to hope and prayer for the market to turn. Before you know it, you’re pretty much wiped out.
For sure, the markets will rebound strongly now and again, but the trend will probably very much be down, down, down from now on. Every now and again, people will latch desperately on to any signs of recovery and declare the market “cheap”, causing fantastic run ups. But the bigger picture is: we’re in the midst of the biggest de-leveraging of the biggest (by far) historical credit bubble ever, and it will probably take god knows how many years to unwind.
This is not just a financial community problem. The credit crunch will spread very soon to affect most people directly as mass sentiment turns negative to hit spending, put businesses out of business, people out of employment and so on. We will spiral into depression and hyperinflation, and eventually, history will record this moment as the start of the biggest financial and economic downturn ever. So yes, I do think there is more to come and that it will run for years and years. So not the best time to buy. You can either believe it now and do something about it, or believe it when you get wiped out, when there is no need to do anything about it.