The Wuhan Virus Strikes and markets all over the world opened way lower than the previous closing. This also means that many of our portfolios also diminished in value “overnight.” No doubt it affects different people differently, it would be interesting to see how different kinds of investors react to paper losses. As an alternative, I would like to emphasize that a dip in price is, in fact, a potential bargain as well. Hopefully, this will offer us a different perspective especially when some of us are trapped in a negative mindset during a downturn.

Firstly, let’s face it, losses are losses, do not let any other person tell you any different. However, is there a silver lining when suffering from paper losses as compared to other losses? The short answer is, of course, and it is way more than “a lesson learned.” Besides understanding the cruel reality of making any forms of losses, we still own the same amount of shares before the drop in share prices. This means that we will still be entitled to the same amount of dividends we’d expect when we punched in the purchase previously. That said, some of us would inevitably feel the pinch when comparing relative prices. At such a point in your investment journey, it would be a timely reminder to only invest in a company you trust at the price you are willing to pay.

Paper losses mess with your mind, not the company you invest in

Always remind yourself that the company you are vested in is in with you through thick and thin. As a matter of fact, any losses will be amplified for the majority shareholders which will likely have more stake of the company than retail investors. This means that they are as “concerned” as they want to be of the company’s market price as you are. Perhaps, the only difference lies in the fact that you are not completely sure about the actual situation in the company because most of us are only provided with the market price and announcements made by the company. As such, it would not be wise to over worry about matters outside of your purview. As investors, you bought a small fraction of the company and at the very least you should stand by your decision when prices fluctuate. Stay true and own your decisions!

Vested or not, investors should always be looking out for a bargain

Any pro-investor will be looking out for a potential bargain in the market. Whether they were already vested in a particular company, they would be thrilled to see a discount on a company that is priced fairly. As such, they might be accumulating when the price is near the bottom. In fact, Investors would actually accumulate as the prices go up as well. This is something that regular investors are unable to comprehend completely. Therefore, always recognize opportunities during price movements and stay objective in your reaction and responses.

Bargains come at a price

This point goes without saying but it is hardly followed when it comes to purchasing shares. The fact of the matter is that people are just too frightened by the latest news or figures, which positions the company in a bad light. Newsflash, the “exaggeration” is the point of the article. Therefore, the next time when there is a bargain in your watchlist, do avoid the fear factor and adjust the Exit Price accordingly before deciding further. As a rule of thumb, if you turn down a deal you wanted before the fear strikes, then you are probably not ready to be an investor.

Closing Thoughts

Being a shareholder of a company puts your capital at risk, therefore, we should always invest with an expectation of paper losses even when the price is fairly reasonable. This helps us manage our reactions when prices dip due to various reasons. Our reactions to market fluctuations should also stay objective and not be influenced by fear. A rational choice would be to adjust our fair value of the stock and accumulate if it hits your revised targets. Last but not least, we should never contradict ourselves in our investment strategies because prices only dip when there is bad news 99% of the time. Planning a lower entry price is equivalent to expecting bad news befalling on a company.