Importance of Free Capital

We have all seen or heard this many time but recently I truly experienced the importance of having free capital on hand. Midway through the month of August, the market took a big turn south. When the Chinese government devalued their currency it sent ripples around the world and all of its markets. Stocks took a nose dive and it created a great buying opportunity.

Unfortunately for me when this happened only .8% of my portfolio was in cash. A great buying opportunity had been created and I had no cash. It would have been a great time to strengthen some of my positions or to establish some new ones. I attribute this mistake to my impatience as a new investor. If I had been patient and slowly just adding more cash to my brokerage account and waiting for this opportunity, the pay off would have been so much better than the way I had decided to do it.

Although I feel like I missed out on a great opportunity this time, I am not going to sulk about it. I am going to consider this as a great learning opportunity and try to use this experience to make better choices in the future. Since it appears that we could be embarking on the beginning of a bear market, there will be plenty of more chances to acquire some good stocks at some good prices.

If you have any comments please feel free to leave them below.

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