The last few weeks started as a few percent decline in the market. As gurus and commentators covered it, they viewed the decline as a temporary, week-long or even a few day-long event. However a few weeks later here we are, still waiting and wondering when the market will rebound.
As a long-term investor this is exciting for me. Not only have stock declined roughly –% from their high, they continue to fall to increasingly discounted prices. Everything might not be a bargain at this point, but after falling about 9% the market is a lot closer to reasonable pricing than it was a month or two ago.
So when prices drop like this, what should an investor do? They should do what the best investors do – find good companies and buy them at favorable prices. This might mean waiting and watching for a good company to drop below your perceived value it.
But for index and active mutual fund investors slowing dollar-cost-averaging into the market may make the most sense. Understand that the market will come back. It’s just a matter of how quickly it does.