The drop today is far from unprecedented, we had a similar (but worse) sell off on February 27. The market is capable of big declines on any day and when it happens you may be inclined to act on your emotions.

It is days like today why I prattle on so much about picking an exit strategy ahead of time before you might be emotional so all you need to do is stick to your plan, whatever that may be.

My plan calls for some sort of defensive action at 1450 on the S&P (that is roughly where its 200 DMA is).

The market will either get there or it won’t and I don’t really care. A bad few months (if that is what is starting) will happen over and over in our investing lifetimes. This is one of those times or it isn’t, I don’t know. Really I don’t have to know and neither do you. If you are disciplined over and over you will add value to your returns over the long term even if you don’t manage this situation exactly right.

To further stress how unimportant this is, how does the LTCM selloff from 1998 impact you today? It doesn’t.

If your exit strategy had you reduce at 1510 or will have you reduce at 1420, it doesn’t matter, just stick to whatever your strategy is and don’t worry about it being exactly right or exactly wrong. If you are right this time, great but you might be wrong on the next go around and vice-versa.

Last 5 posts by Roger Nusbaum

• The Big Picture for the Week of November 15, 2009 - November 14th, 2009
• Process Drilldown - October 23rd, 2009
• Sunday Morning Coffee 10-18-09 - October 18th, 2009
• A Little Followup From This Morning - October 8th, 2009
• Wednesday Roundup - October 7th, 2009