Something excellent happened on the stock market yesterday. It went way down. The Dow by over 300 points; the NASDAQ by almost 50; and the S&P by 35. This is all good news. Wondering if I lost my mind? Well, not quite yet. It's all a question of whether you are a long term net buyer or net seller of stocks. Since my wife and I are in our mid-thirties, we are probably going to buy much more stock than we currently own, before we need to realize our investments to fund our retirement. This means that short term stock price declines are ultimately a good thing for us.
The curious thing is that most people view a stock market decline as a bad thing, regardless of their personal financial situation. I am not quite sure why this is the case. I mean, if Macy's or Target holds a sale, they advertise it and people stand in line to be the first in the store. If stocks go on sale, people head for the exits. Can you imagine NASDAQ advertising a summer sale? That would be a pretty lame commercial, but how are the two cases different? In both cases you get a discount today for something that would have cost you more yesterday. That's cause for enthusiasm. Well, it's cause for enthusiasm if you have a long investment horizon.
Nevertheless, I will admit that a few back-to-back days of "stock market sale" can be a little unnerving. Hey, I'm not made of stone.