To sell or not to sell in this bear market.

The date is 15-03-2011. For the past few weeks, negative news keep spewing in affecting the markets day by day.

• Firstly Chinese govt trying to introduce new regulations to minimize the growth of inflation, their property market.
• Unfavored weather patterns results in low produce which increase the price of commodities. 
• Libyan uprising results in the spike of oil price. 
• Spanish downgraded 1 notch by Moody on Mar 10 2011
• Earthquake & tsunami in Japan. 
• Today news reported about the meltdown of Japanese nuclear reactors and fear of radiation send world markets in red numbers.

The first thing that pops in my mind is how much have i lost. I'm an investor following the techniques of value investing. Even i have the fear of losing money, looking at my live watch-list a few hours ago thinking, 'Why i never liquidate my portfolio a few days earlier'.

Closing off the watch-list, i recalled that my goal is long term investing. Due to fear, i have forgotten that i should invest long term when i started to inject my funds into the market.

I opened up my book, Value investing by James Montier. I'm a fan of his articles and his articles can be found here

His works are based on behavioral investing and he has shared some of his ideas and advice in his books.

In his book (Value Investing) on page 210, he has shared that short term underperformance is often the by-product of a sensible investment process. For instance, if everyone else is trying to guess the next quarter's earnings and you are exploiting a long time frame, you may find yourself staring at the wrong end of a bout of underperformance.

He has stated that even on a 3 year horizon, between 20% and 30% of best long term managers were in the bottom decile.

So for me or even you in this case, and you are using fundamental & value techniques to invest and current looking at the red numbers in your portfolio, FRET NOT!!! You are not alone.

In the James Montier Book again, Value Investing, he included a section on page 209 showing the list of value investors (source from guru focus) performance of stocks bought in the last 12 months for Year 2009 Feb. (My book states the date of published was Feb 2009, so i assume this list of value investors bought their funds between 2008 to 2009).

• Bruce Berkowitz: -9%
• Mohnish Prabai: -38%
• Richard Rogriguex: -21%
• Tweedy Browne: -13%
• Jean-Marie Eveillard: -7%
• and a few more which i will not list here

I checked my analysis again to see if i can uncovered anything i have missed, and calculated that right now my portfolio is down by -12.9%.
Even experts are having unrealized negative returns in their portfolio and strongly believe in their visions of long term investing based on their experiences, so why should i, who is not even an expert has to fear about.

So to end this topic, what have i done to ensure that my portfolio is alright and i should be patient? As followers of value investing should understand that value investing and patience goes hand in hand.

• I check my analysis, how i derived my estimated value again and checked if the company has any new problems surfacing.
• Ask myself, what caused the market to dive down. Is it the industry problems, world-wide news or company issues?
• Ask myself again, when i start to invest, am i investing for long term or speculate for short term? If long term, why bother about negative news that will temporary affected the market?

Lastly as what James Montier has mention on page 127:

Investors should consider trying to adopt the Buddhist approach to time. The past is gone and cannot be change as well as the future is unknown and we must focus on the present. The decision to invest or not should be a function of the current situation, not governed by our prior experiences. Our brains looks to be wired to focus on short term and fear loss. These mental hurdles are the barriers to sensible investment decision in a bear market.