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Chapter 17. Crises Are Like Little Gifts > Crises Give You a Chance to Gain Obj...

Crises Give You a Chance to Gain Objectivity

One benefit of a crisis is it gives you the chance to gain objectivity. Often, that level of objectivity is missing from the investor’s mindset. In good times investors become emotionally involved with their investments. When markets decline, they can even become more committed to the item that hurts them the most. In a crisis, you take on a new perspective. Enlightened, you can look at your investments with fresh eyes, facing facts and examining choices, risks, and results.

One way of doing this is to assign your own grading system to your investments. For example, an “A” investment is 100% reliable in the long term, even if its current market value, in your mind, is temporarily down. This investment may have official “backing” such as a U.S Government security or AAA-insured municipal bond. A “B” investment is one that may seem sound, but for whatever reason you are questioning it at the moment. These are investments to reevaluate in 3 to 6 months. A “C” investment is one that appears to be a mistake. With your C investments, you have to stop being delusional. It’s possible that selling them, taking your losses, and reinvesting elsewhere may be the best choice.


  

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