Monday, March 23, 2009

How to Gain From Your Losses

Posted By: Bovemsa Cheung

The value of stocks is down by half. The financial system is a shambles. Warren Buffett says the economy has "gone over a cliff."

Little wonder that investors are dazed, confused and thinking more with their hearts than with their heads these days. The problem with investing by emotion is that it's likely to do as much damage to your savings as any market drop inflicts.

To combat this, keep in mind that financial news these days is both misleadingly grim and a lousy barometer by which to plot your financial future. A prime example is the endlessly repeated factoid that's driven many an investor to despair: Stocks are down by half. By half!

Truth be told, they've fallen a bit more than that--but only from their momentary October 2007 peak. Measuring your losses by such a yardstick is like beating yourself up for being bad at math, compared with Albert Einstein.

No comments:

Post a Comment