As I write this, the market recovers from the worst sell off of 2024. By the time you read this, who knows where it is? This is when most people will make decisions that permanently damage their long term plan.
Don't be one of those people.
Here are three things to remember when markets go crazy:
Cash(flow) is king. Not everything can be solved by money, but a stock portfolio can gain much needed time to recover if your cash flow is still good. So as long as you have this squared away and a decent emergency fund, do yourself a favor and do not panic. Also, every king needs subjects, and cash is only one part of an investment strategy. So just as a Kingdom with nothing but kings, an “investment portfolio" with only cash is not likely to make much progress.
“You make most of your money in a bear market, you just don't realize it at the time.” This quote from Shelby Cullom Davis helped many of our clients during the COVID shutdown commit capital that others were afraid to commit. These clients bought at historic market lows, and you can imagine how that has turned out for them.
It's rarely as bad or as good as you think. Scared investors (or irrationally exuberant speculators) are fond of saying, “it’s different this time." But if you look at all the times in history when other investors or speculators have said the same thing, very few big scary events end up having a big scary outcome. Here's a short list of events in my lifetime that people thought would turn the market negative for a long time, but didn’t: • Oklahoma city bombing • The impeachment of President Clinton • China imprisons U.S. Air Force pilot and crew after an emergency landing on Chinese soil • H1N1 Flu pandemic • Russia invades and annexes Crimea • Ebola pandemic • Impeachment of President Trump (twice) So, you’ll understand when we avoid the pessimism of thinking, “but this time it’s different,” when there is little evidence to back this up. It goes the other way too, though. Here’s a list of company's people thought were amazing, but now have either vanished entirely, or have become a shell of their former selves: • Sears • Circuit City • Blackberry • Pacific Southwest Airlines • Enron • Theranos It’s rarely as bad (or as good) as you think. So when the markets go crazy, don’t you go crazy with them.
Here’s the Recap:
Cash(flow) is king
You make most of your money in a bear market, you just don't realize it at the time.
It's rarely as bad or as good as you think.
Stay sane out there!
Any opinions are those of Timothy Weddle and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.
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