When everyone believes something is risky, their unwillingness to buy usually reduces its price to the point where it’s not risky at all. Broadly negative opinion can make it the least risky thing, since all optimism has been driven out of its price.



In good times - perhaps emulating Warren Buffett – investors talk about how much they’d like to see the stocks they own decline in price, since it would allow them to add to positions at lower levels. But when prices collapse, the chance to average down is usually a lot less welcome ... and a lot harder to act on.

Investors can be tempted to sell during corrections like this one. Oftentimes emotional behavior is cloaked in intelligent-sounding rationalizations like “it’s important to sell down to your comfort level.” But the valid reasons to sell are principally because you feel fundamentals have deteriorated or because the price has risen enough. Selling to get more comfortable as prices fall (just like buying for that purpose in a rising market) has nothing to do with the relationship between price and value.


It’s desirable that everything in a well-diversified portfolio performs well - The truth is, if all the holdings were to perform well in one scenario, they could all perform poorly in another. That means the benefits of diversification wouldn’t be enjoyed. It shouldn’t be surprising - or totally disappointing - to have some laggards in a portfolio that’s truly well-diversified.

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