Don't panic

The stock market has taken a precipitous dive in the last few days, which leaves many people worried about their money and causes some to try to cut their losses and get out as soon as they can.  The problem is; after the market drops, it's already too late.

In this week's episode of 'Ow My Balls'

The price of a stock (and that of the market as a whole) is basically driven by buyers of stocks.  The biggest investors are fund managers, who have to try to make a profit no matter what the economy looks like.  The market drops when these people sell their stocks, due to sheer volume.

This is a quote I got from an article in the Wall Street Journal today: "Worried that the slowdown could spill over into the U.S., money managers on Friday sold stocks and piled into relatively safe assets such as Treasurys."

Now, you are probably not a fund manager.  You're not under pressure to make a profit every quarter.  You are in it for the long term (and if you're investing for something less than 7-10 years, get out immediately and put your money in bonds, a CD or a high yield savings account).

All that being said, you can't time the market.  No one knows when it will hit its peak and when it will hit its bottom, so there is no use in waiting to sell until it's at the top, and keeping your money safe until the end of a crash, at which point you put your money back into the market, buying stocks when they're cheap.

Your best bet is to do something called Dollar Cost Averaging, which is where you invest a specific amount of money every month, no matter what is going on in the market.

Now, that's not to say there aren't opportunities to be had.  Crude oil is down something like 46% over the past few months.  There are many reasons for this; shitty economies in foreign countries, Russia being stubborn, and OPEC trying to drive US shale companies out of business, to name a few, but I think we can all agree the demand for oil won't be going down for the foreseeable future, not until renewable energy becomes more affordable and ubiquitous.  And the global supply is going down.  Current production levels be damned.

Fund managers are getting rid of oil stocks like they have Ebola, because in the short term, they will lose a lot of money.  But for regular investors, whose time frame exceeds the next few quarters, now (or soon - I have no idea when oil will hit its bottom) is an amazing time to invest in oil.  Dollar cost average that shit.  If you have $5000 to spare, put $500 a month for the next 10 months, and watch your money multiply over the next few years.

So my advice here is:
1) Don't panic.  If you are itching to sell, it's too late.  Stick it through.  Maybe move your investments around a bit, but don't dump all your stocks.
2) When the money managers are panicking and selling all their stuff in one sector, that's the perfect time for the average investor to snap it up, because they just conveniently drove down the price for you.  Of course, be sure to do some research and check to see if the company is strong and will be viable for the future.