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Keep Your Head as Markets Dip
As the world markets dump, it can become tempting to follow suit and abandon a carefully crafted investment thesis. I admit that it is demoralizing to see your portfolio run red, but to abandon the equities you took the time to vet and accumulate as they fall in price and risk principle loss is bad business. I want to encourage you to continue to pursue your dreams and investment goals during this bear market. I also want you to look at this in the proper way so that you can profit as the world loses its mind.
The stock market is a measuring device of value. It is psychologically run, and the fundamentals of good companies including Apple, Microsoft, Coca Cola and 3M have not materially changed due to the selloff. Inflation and geopolitical issues have added pressure to the markets, and the markets hate instability. Imagine a scale trying to delicately measure the value of a share based on investor sentiment and fundamentals being shaken by an earthquake, and you see the problems markets face. The earthquake is fear and a lack of faith in market fundamentals. It’s always best to buy when fear is high and before greed takes hold.
I am personally pumped to have this opportunity. When the markets tanked at the beginning of the pandemic in March of 2020, it was an exceptional time to purchase equities. Retailers, technology, utilities and the index funds that power my portfolio were on sale as investors ditched quality companies. I was amazed that funds and investors decided it would be a good idea to abandon quality companies, and even Warren Buffett dumped all his airline holdings. I deployed cash using dollar-cost averaging and was rewarded heavily. I’ll do it again this time, and am aware that the unwinding of the FED balance sheet and geopolitical instability make this a risky bet. I am aware of the risk and am dollar-cost averaging for long-term profits.
Make sure to keep doing what you are doing. The stock market has recovered immensely since the 2008 crash, and the S&P 500 Index has increased in value over 300% since the last crash. Dollar-cost averaging is an effective strategy espoused by experts to weather the storm. Taking your principle and investing at regular intervals is a good idea to smooth out peaks and valleys works. Remember that the market was fundamentally overvalued due to FED quantitative easing and low interest rates. Money was easy and cheap to borrow since 2008 as interest rates hovered near zero and the FED has been buying equities. The demand and cheap money that flowed to large businesses and that was put onto the FED balance sheet pumped the market up. This may be changing, so keep buying to capture deals.
Buying when investors are fearful is a time-tested strategy. The story of how a young Warren Buffett purchased shares in American Express during an exceptionally tumultuous time bears testament to how profitable this can be. Companies and markets face issues, some unforeseen, daily and many recover. Remember that large companies including American Airlines, U-Haul and even 7-11 have gone bankrupt and arisen from the ashes. Equity investors may or may not profit from these moves, but if you spread your exposure over many markets and strong equities you will likely profit. Even Apple, the largest publically traded company, faced major headwinds in 2015-2016, and its future was uncertain. Microsoft was deemed “dead money” for years before the tech FANG run.
The cryptocurrency and equity markets are time-tested methods for accumulating wealth and moving investors towards their goals. Why not buy these valuable equities now while they are on sale? Discounts on valuable assets are rare, and after a decade-long bull run, it’s time for a sale. Keep the faith in the efficiency of markets over time to make investors wealthy. Investors of every walk of life and stance have profited, and so will you.
