The Hitchhiker's Guide to Investing

“Don’t Panic”

This article reprinted with permission from InvestmentU.com.

That’s what’s written on the cover of Douglas Adams’ science fiction classic, The Hitchhiker’s Guide to the Galaxy.

The novel is one of my favorites. The book’s antagonists, the Vogons, I find to be some of the most terrifying villains in literature. And the large, friendly letters printed on the cover of the novel - “Don’t Panic” - spell out one of my personal credos.

In fact, fellow science fiction author Arthur C. Clarke said that Adams’ “Don’t Panic” was the best advice he’d ever been given and might be the best advice ever given to humanity.

When faced with any life-threatening situation, whether being attacked by a Vogon or trying to escape a burning building, the No. 1 rule is always the same: Don’t panic.

Stay calm...

Though, oftentimes, that’s easier said than done.

A Plague of Fears

For investors, the urge not to panic is extremely difficult. And it’s probably the hardest part of investing for people to learn, adopt and understand.

In every situation, panic leads to mistakes. Investors see red and all of a sudden the siren’s song of the sell button starts calling.

Panic starts creeping in.

That can be just as dangerous of an investing mistake as any.

Now, I’m not telling you to never sell stocks. I’m saying your exit strategy should be determined before you even hit that buy button.

If you don’t overweight a position... If you have a stop in place (a trailing stop or a hard stop)... You know the worst-case scenario before you place an order.

That’s what eliminates panic.

Right now, there (once again) appears to be a number of reasons to panic as an investor... Oil is tanking... Russia appears heading for recession as the ruble crashes... Europe seems to be stagnating... The markets are taking a pummeling... Congress...

These are weights dragging on your portfolio in some form or another.

But now is not the time to panic. Now is the time to look for opportunity.

And a lot of that is to be found with the American consumer.

Where Everything Is Rosy

There was a lot of fuss made over Black Friday numbers a couple of weeks ago, but the truth is same-store sales numbers for the retail sector came in higher than expected. Retailers saw a 5% increase in same-store sales on average in November versus expectations of a 3.4% increase.

In fact, according to Thompson Reuters data, same-store sales for the apparel sector increased 6.5% last month, well above expectations of a 1.1% increase.

Discount retailers averaged a 4.8% increase, above projections of 3.8%.

And the much-maligned teen apparel sector, which was only expected to see same store sales increase 0.2%, surprised with a beat of 1.8%.

On Monday, as the Dow and S&P and Nasdaq slid lower, companies like Francesca’s (Nasdaq: FRAN), Lululemon (Nasdaq: LULU), Urban Outfitters (Nasdaq: URBN), Kate Spade (Nasdaq: KATE), Macy’s (NYSE: M), Dillard’s (NYSE: DDS), The Gap (NYSE: GPS), Nordstrom (NYSE: JWN), Michael Kors (NYSE: KORS), Foot Locker (NYSE: FL) and others all moved higher by 1% or more.

All in the retail sector.

Some of these had been beaten down in recent months while others were inching back toward their 52-week highs.

This is the time of year these companies make their money. And though the tumbling price of crude might be killing the energy section of your portfolio, it really is putting more money in people’s pockets.

And Americans spend their money.

I know that sounds cliché - and I really hate that - but the data shows it to be true.

Automakers had their best November since 2001. In fact, so far this year, sales of SUVs are up nearly 50% year-over-year, driven by falling gasoline prices.

Plus, consumer sentiment is on an upswing, rising to its highest level in 7 years.

The market may make moves depending on what it thinks the Federal Reserve might do about interest rates. Oil companies might be socked by plunging crude prices. There might be investor panic over whatever crazy plot Congress might concoct next.

But no one has ever based their holiday spending on any of those things.

You want to be insulated from the volatility? Follow Adams’ advice: Don’t panic. And look toward the average American happily spending newfound money from lower prices at the pump on gifts.

Matthew Carr is emerging trends strategist at InvestmentU.com.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.