Global sharemarkets are a vibrant scarlet on Tuesday morning as investors around the world sell their stocks to a group of buyers making smaller and smaller bids. The headlines shout about a wipe-out of billions, or even trillions in value. The ASX fell 4% on Monday, and Shanghai fell 8%. Wall Street fell 4% last night, the Nikkei 4.6%, London’s index 4.7%. Tuesday’s trade is in session, and it seems a small share of the losses has been recouped already. But what does it mean to the real-life share investor? Those lost billions are paper losses. They compare the hypothetical cash value of the sharemarket before and after the day's trade. Paper losses count most when they are realised -- you can be behind when you're playing blackjack, but all that really matters is your holdings when you walk out of the casino. Young people are probably going to be fine. They are going to sit at the felt for hours. There’s plenty of time to make back their stack. The oldies, though? They're halfway to the cash-out window when 10% of their chips just vanish. If you fund a retiree lifestyle by selling shares you bought a long time ago, either your income drops or your ability to sustain that lifestyle shrinks by a couple of years. (Although if you are using the sharemarket to boost your deposit for a first home, you’ll be renting for a while longer yet.) For this reason, investing in shares is a wiser move for the young. People living off their assets should be far more invested in cash and annuities, in order to manage this exact scenario. The older, wiser investor who does have shares, is also well advised to be betting on the boring parts of the ASX. CSL fell 2% yesterday, less than the market’s average fall. Other defensive stocks, like Domino's Pizza, did relatively well too, falling only 2.15%. Fortescue Metals, meanwhile, fell almost 15% yesterday. Holding your stock through a dip can make sense. The market price of a security is a function of the latest interaction between a willing buyer and willing seller. It needn’t have any relevance to all those holding the stock. They can have beliefs about that stock’s long-term value that are independent of other people’s beliefs. The efficient-market hypothesis says the only fair value for an item is its price, but the efficient market hypothesis has been found desperately wanting in recent years. Just because someone sold a tiny fraction of BHP at $22.85 yesterday does not mean everyone holding the stock has to agree that is a fair price. The current price, rational actors can believe, is not representative of a fair price. Those people will hold onto their stocks through the storm. “It’s not timing the market, it’s time in the market,” they will tell themselves. This dip is, of course, probably a short-run event. Most sharemarket falls reverse pretty quickly. You can see on the graph below several sharp panics followed by sharp rises. Every trade has two sides, so talk of a “sell-off” may mislead the sharemarket ingenue. We could also describe the events of Monday, where $5.2 billion in stocks changed hands, as a bargain-buying frenzy. Many smart investors are probably "buying the dip".