Last Thursday’s blog post turned out to be more prescient than planned. I certainly didn’t expect today’s selloff, but considering the increased hostility in the Middle East I suppose we shouldn’t have been surprised.
This isn’t yet a tradeable market retreat – I’d like to see stocks down 5%-10% – but as I said earlier, it makes sense to start planning in case traders continue dumping positions.
The purpose of buying while prices are lower is to lock in valuations caused by panicked sellers (FYI, there are also reasons to buy while prices are heading higher, but that’s a discussion for another day). But to do that, one must be willing to part with an existing position that has done well, which allows investors to lock in gains while searching for better deals elsewhere.