Days like Thursday test the patience of long-term investors. People want to know what caused the selloff. News media answer this question by speculating about causes, because they have to publish something.
Technical traders are less concerned about the "why." They tend to focus more on the "what."
So where does that leave you?
It's no fun to check your accounts after a day like Thursday, and see the decline in balances. You begin to second-guess yourself, and wonder if you should sell, hold, or add more to beaten-down positions.
There are plenty of ways to handle a selloff day; ask two pundits, and you'll get three answers.
If you're in it for the long haul, it's usually worth a bit of patience. Make sure your portfolio is properly diversified across market cap and asset classes. If you have sector bets, or bets on a specific commodity like gold (which would have made you happy on Thursday), think carefully if that's still wise.
For long-term investors, a pullback often presents a chance to add to an asset class. I'm not necessarily talking about something on the riskier side, such as emerging market small caps. But your position in an S&P index like the SPDR S&P 500 ETF (SPY)? Might as well add to it. History has shown that it goes up eventually.
But what about your speculative investments -- also known as "trades?" Jim Cramer's right when he says there's always a bull market somewhere, although on occasion, you might have to interpret that as "some assets perform less badly than others." That's OK. But usually, if one asset class is lagging, another is picking up the slack. Hence the need for proper diversification.
You can take that down to a granular level and see what's holding up on a selloff day. Plenty of stocks defied the broader move Thursday. From the S&P, gainers included Motorola Solutions (MSI), AutoNation (AN), Ventas (VTR) and First Energy (FE). Hey, not the largest of the large caps, but all was not lost.
From the ranks of smaller growth stocks, Thursday gainers included Blackhawk Network (HAWK), Skechers (SKX) and Envision Healthcare (EVHC).
My point is not to give you a market recap. It's simply to illustrate that yes, there really is a bull market somewhere. (And I didn't even mention U.S. government bonds, which rose Thursday as investors sought some perceived safety outside of equity markets.)
Of course, it's the longer trend that makes the difference, not a daily list of what's hot and what's not. That's why it's imperative that long-term investors ignore the noise of day-to-day market gyrations, and even normal, cyclical pullbacks.
It's OK to keep up with market news, but not if it causes you to abandon your investment strategy and abruptly pick a new course. If you have sector or regional bets, keep an eye on those -- but that's always the case. It's not special advice for a day of selling.
And always keep your long-term goal in mind.
