• Shares of stock in small US companies - 12.7%
• Shares of stock in large US companies - 10.4%
• Long term government bonds - 5.4%
• US treasury bills - 3.7%
• Inflation - 3%

Even if you do as many have done recently and run to treasury bills for safety, you will be losing money. None of these returns are adjusted for the tax that must be paid on the gain on investment when they are sold. On an after-tax basis, adjusted for inflation, you will LOSE spending power in this investment. Guaranteed.

Market timing doesn't work

The reason long term returns are higher in stocks is because you are paid to take risk for higher reward. One type of risk you are assuming for this investment is called "systemic risk." That is the risk that the entire market will go down, taking, of course, your investments with it. That is a real, predictable risk that you take for being in the stock market. There was one in 2001, where the "Internet bubble" burst, in the early 1990's, 1987 and in the mid-1970's. Some are of a short duration; others last for years.
No one has successfully predicted market corrections. Even if it were possible to get out of the market prior to a correction, it would also be necessary to get back in at precisely the time it moved up. You'd have to be right twice, or forego much of the "rebound" that took place when the market recovered.

Let me repeat. NO ONE has successfully predicted market corrections.

Long term investing means just what it says

Jim Cramer, host of "Mad Money" on CNBC, recently advised his listeners to cash out any money they would need in the next five years. What?

The stock market is an appropriate place for long term investing, based on its historic long term returns. "Long term" is definitely over five years. Long term should actually be considered more like ten, fifteen or twenty years. Anyone who invests in the stock market for the short term is a gambler. "Trading" is gambling. It is NOT investing.
Market corrections are predictable in the course of stock market investing. They happen about every decade, as mentioned before. And, every time one happens, you would think the current correction was the first one in history, judging from the behavior of investors. If you're not prepared to withstand a correction, you have no business in the stock market because if you sell during a correction you are guaranteed to lose money.

This is the time when serious investors make serious money
When was the last time you knew that Warren Buffett was buying? When was the last time you knew what he was buying?

Many investors follow the changes in Berkshire Hathaway, Warren Buffett's company, for the slightest indication of what the Oracle of Omaha is buying. Usually the disclosures are made public long after his actual purchases are made. Now, we know he's investing in Goldman Sachs and General Electric. Think about this.

Value investors, Buffett being the most successful of our time, wait for prices of well run companies with predictable earnings and competent management to fall to bargain prices. Buffett began amassing his fortune in the stock market correction in the mid 1970's. During times like these, value investors make the investments that result in extraordinary returns.

The one important question you must answer

It's not necessary to "pick the bottom" of this correction. All you need is the ability to know what is undervalued, and buy it. It takes courage. How do you know whether you are making the right decision?

The one question you must answer in the affirmative is this. Do you think that the US remains the premier financial powerhouse in the world?

If so, this may be the buying opportunity of a lifetime. Don't be one of the people who passes this up, or worse, one who sells.

No one ever made a penny by panicking.

Stocks slide because...

When stocks slide it means something went wrong with bulls. And bears have taken over. These are stock market terms. In simple terms, investors who buy for the long term have stopped buying but many investors started selling stocks either due to fear or to book some profits. There are many clear reasons why stocks are falling. One is for example, inflation is at a high rate or the stocks are overbought. It means that after some time they will come into control and stocks will stop falling. So it is better to assess the extent of problem before selling in panic. Sell it if you are the first to sell but not after many have started selling.

Why you should not sell

Depending on the problem you can wait for the time or sell immediately before many investors sell. Selling in panic happens rapidly. So even if you decide to sell before anyone does, there is less time for that. So it is not advisable. Rather be prepared to add some money to average the bought price.

One thing that consistently happens when a stock slides is its retracement or rebounce.

If a stock is just consolidating gains it will rebounce. This is when people sell in panic and burn their fingers only to see the stock recover quickly.

When stock is falling due to strong fundamental reasons and it will take while before things get corrected, there is a consistent chance for retracement over time repeatedly. So if you decide to sell wait for retracement and sell to reduce the losses to some extent. If you have bought before upward retracement then you can eliminate losses or even make profits. But if only you sell otherwise the stock will again fall for some more time. Then you have to wait for a long time to relish the gains.

In fact, what happens in the market is that those who have waited all the time and even more time for it to reverse up make more money than anybody else. Those who wait for some time only to lose control and sell sadly definitely make big mistake. Because the accumulated sentiment that they get will be detrimental for their investment decisions in the future. Those who sell during retracement generally tend to neglect that stock when it reverse due to good fundamentals. They lose the rally.

Conclusion

Stocks have retracements and rebounds. So never sell in panic or during stock sliding. Even central banks take care of that to control investor sentiment. Follow proven strategy of averaging the stock price to reduce the bought price and waiting for its fundamentals to correct. You will be glad you did this when you realize what would have happened otherwise.