5 Ways to Avoid Getting Creamed By a Falling Market

The financial markets are nutty. How’s that for a basic truth? To give you an example from my own life: One of the companies in which we are currently acquiring shares is literally trading for less than the cash the business has in the bank! These situations are relatively rare, but it goes to show that an undervalued stock can get even more undervalued, regardless of the irrationality of it. Sometimes this happens because investors panic, sell the mutual funds in their 401k to switch to cash, forcing otherwise good money managers to liquidate their shares of great companies, driving the prices down further. That’s why one of the 20th centuries’ greatest economists made the very wise observation that markets can remain irrational far longer than you can remain solvent. Continue reading ...