Three years ago Warren Buffett said "Be fearful when everyone is greedy. Be greedy when everyone is fearful." We had just seen a huge crash in worldwide stocks and shares on the back of the bank crisis and the legendary investor decided to speak out.
It is human nature for fear to sink in when everything we had known and hoped previously dramatically changes for the worse. When faced with threats, the two options we have are to fight back or run away. In face of danger, the body changes its inner-balance and priorities into a high physiological arousal which allows our bodies to quickly make a decision.
Generally, when the fear is so great that if we stay and fight we would almost certainly lose, we run and vice versa.
For an investor the biggest fear is to lose all their money but at the same time any experienced investor will know that nothing goes up in a straight line and market movement is inevitable. However, when we see weeks of negative headlines about our 'doomed' economy in the UK, Europe and Worldwide it is hard to see how this is not going to end in tears for many.
For me, personally, my body has told me to run, I have sold all the shares I own on fear of what a Greece default would mean for shares worldwide, would we see a domino effect? Would the problems we have in Spain, Portugal and Italy replace Greece on the front pages and cause more fear?
If Greece somehow, miraculously, is saved from the brink then without a doubt my decision to sell would have been the wrong one, at least in the short-term as the market would surely have to react positively. If Greece succumbs to its debt then a lot of those who have not already bailed, will do and the falls we have seen already will just be the beginning. Let's remember, the FTSE has taken a big hit in recent weeks but is still holding on (just) to its support at 5,000, back in 2008 the FTSE recorded a low of 30 percent less at around 3,500.
The stock market at the moment is on a knife-edge and dependent on which way Greece falls will determine which way the market moves in the short-term. Long term we still have issues to overcome but nothing quite as drastic. There is plenty of time to be greedy in this market, even if Europe is saved, gold for instance will probably pull back as confidence in other currencies will return. On the reverse there will be plenty of bargain basement shares around should my fears be realised and I will be in a position to take advantage.
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