Jerry Seinfeld once wondered aloud, “Who are these people who get on a plane without a book? I’ll tell you who they are. These are the people who want to talk to you,” he quipped.

To paraphrase Ayn Rand the best way to knock over a house of cards is to follow a position through to its end as it will be crushed beneath the weight of its own logic.

These two seemingly unrelated thoughts entered my mind during a recent flight home from a business trip when a passenger struck up a conversation with me. After finding out what I do for a living he began talking my ear off about everything from taxes to health care to who knows what else as I had tuned out in hopes of catching a snooze prior to takeoff.

Eventually he got around to moaning about the recent stock market selloff. What caused it? What should he do about it? Sell everything? Hide under the covers? Blah blah blah.

Mustering a Rand-ian effort or possibly channeling Socrates I decided to pose a few semi-rhetorical questions.

ME: If you sell now what is your plan?

PASSENGER: What do you mean?

ME: Well, you’re nervous and worried, right?

PASSENGER: Yes. It isn’t easy watching my money go away and not having any control over it.

ME: Ah, but you do have control over it.

PASSENGER: What do you mean?

ME: Well, you have options. If you sell what will you do with the money? Will you reinvest it in the stock market?

PASSENGER: You mean ever?

ME: Yes.

PASSENGER: I guess.

ME: When?

PASSENGER: I don’t know.

ME: Do you have another strategy for earning the returns you need to achieve your goals?

PASSENGER: (no comment)

ME: Prudence dictates having a strategy in place before dumping your current strategy.

PASSENGER: Well, I can get back in when the market bottoms – when things aren’t so unstable and uncertain.

ME: How will you recognize it? They don’t ring a bell.

PASSENGER: What do you mean?

ME: There’s no signal. The only way to recognize a bottom is after the bottom.

At this point the passenger recoiled into quiet reflection (or, more likely, a dumbfounded realization that he mixed up the order of think first, speak second) while I unsuccessfully tried to catch that quick cat nap.

OK, I apologize. I was tired. I certainly didn’t intend to pick on the guy. Chalk it up to tired frustration I suppose – something we’ve all suffered from while logging mile after mile in the skies.

There is an important takeaway from this little back and forth however. If we sell our investments what is our plan?

Plan A might be that espoused by my fellow passenger and reinvest when prices are lower. But is this feasible? Not only can we not recognize the bottom but if we’re selling based upon fear and nervousness what makes us think we’ll contradict the “advice” of the pundits, the talking heads, neighbors, family, friends and co-workers should the markets head even lower and there’s likely more fear and panic? We won’t. We’ll end up with Plan B.

Plan B is to buy back into a “safer” market which by definition is one where prices have bottomed and are climbing. In effect we dump our holdings at artificially depressed prices and repurchase at higher prices. “Buy high and sell low” has for far too long been the individual investor credo!

Plan B when implemented to perfection is a solid way to lock in lower returns than the “do nothing” alternative. Knowingly or unknowingly the choice of Plan B is a sacrifice of wealth analogous to the choice made by Socially Responsible Investing strategies that avoid Sin Stocks (e.g. tobacco, alcohol, defense).

Selling into a panic earns a few nights of peaceful slumber in the short-term. In the long-term it earns us many sleepless nights when markets climb and we do not profit from it.

Were we nervous in March of 2009? Possibly. Did we dump our holdings? Some did. How’d we do while markets climbed the rest of the year? Did we miss out altogether? Did we buy back in at higher prices? How’d that compare to those who didn’t dump their holdings?

And so my fellow passenger and airline friend were you nervous during the June selloff? Did our little chat provide any perspective on how to deal with it?

As we’ve bemoaned time and again (who said repetition is bad?) actions based upon emotions or acting for the sake of acting are a loser’s game. It’s something to think about as we push ahead into the second half of 2010 with our eyes on how we can be opportunistic while never losing sight of our long-term goals.