One of Warren Buffet’s most famous quotes is
“Be Fearful when others are Greedy. Be Greedy when others are Fearful.”
I’d suggest it’s fair to say that fear has ruled the day over the past couple of months. We have seen the fastest decline in history from an all-time high in the stock market to a 20%+ drop.
With fear comes opportunity. It’s often been said that people spend more time planning a vacation each year than they do planning their retirement. Life is hectic and there are a lot of people who are guilty of just putting their money on autopilot and letting it go. One positive outcome of a market drop like we’re experiencing is that your money now has your full attention as we watch the wild swings of the markets.
I’ve always suggested that “Nobody cares more about your money than you do.” However often times you have a distant relationship with your money. You might care but be disconnected from the actual data. Now is the time to re-engage.
Here are a few tips:
Don’t just put your head in the sand and do nothing. Now is the time to play offense. That cash you have sitting on the sidelines, perhaps it’s time to start dollar-cost averaging some of it into some high-quality stocks and funds. Opportunities like this do not come along very often. When they do, take advantage of the stock market that is “on sale”. Isn’t it funny how we get excited when anything else is on sale for 25% off but for some reason we get extremely fearful when the stock market is moving up and down 25%. I get it, it’s our money that we are talking about instead of some product. But instead of running towards the sale we tend to get paralyzed with fear and thoughts of selling and getting out to stop the pain. We have to change our mindset and instead of looking at the market drop through our fear glasses, let’s look at it through the lens of opportunity. There are some very high-quality stocks that have been beaten down to some very low prices so now is the time to start bargain shopping.
It’s time to look at your current holdings and do a diagnostic on them. Are you in the right holdings when the recovery comes? Being hunkered down in 100% bonds might ease your mind and give you a warm and safe feeling right now but when the recovery comes, and it will, what’s your plan to get back into stocks? Playing the safe game can relieve the stress in the short term, but it’s not going to help your money when the Dow moves up 4000 points and then you decide to get back in. Trying to time the market by jumping in and out is a losing bet. Review your accounts to make sure you are in the best position to take full advantage of the recovery when it comes.
Nostradamus isn’t alive and being interviewed on CNBC. As much as the so-called experts think they know what’s next for the markets, they are all using a certain level of guess work. Yes, the markets are going to bounce around, reacting wildly to news both positive and negative. The markets will recover but nobody knows how fast or when that will happen. The business networks have certain folks they interview who are always negative… as well as certain one’s that are always positive… so I’d suggest taking what you hear with a “grain of salt.” Just know that the ride is going to be bumpy and we’ll eventually recover from this.
Stay calm and don’t let your emotions get the better of you. I can’t say this enough. I’ve said it in recent blogs and on the Facebook Live stream. Stock market drops are stressful, but you want to stay as calm as possible. We tend to make bad decisions when we’re emotional and that’s the worst thing you can do when you are dealing with your money. Try to stay level-headed and make smart decisions. If you recognize that you need help, reach out to a financial advisor for guidance.
Don’t let fear paralyze you because you won’t be able to see the opportunity to make money that lies in front of you. Clear your head, review your current holdings to see if changes need to be made and go on the offense. You’ll be rewarded for it.
Drop me a line anytime for some help and guidance on the button at the bottom of any screen.
Live free my friends,
Eric Gaddy
