I’ve lost it all - all of my gains for 2019 in 1 week and it honestly doesn’t feel very good! As a new investor, this can be extremely discouraging, especially if you’re brand new to investing, meaning, you just started and now your portfolio has tanked. I can speak from experience that I’ve seen my portfolio go from a negative 3 percent to 21 percent in one year. Is this guaranteed to happen again? Absolutely not, but, my point is, the stock market typically does recover. So if you’re on edge like I am, I want to encourage you all to remember the reason why you got into investing and don’t lose sight of that. I think now is the perfect time to clarify that I am not a financial advisor, or a financial expert. I’m just a regular guy (a millennial) trying to build wealth and look for opportunities to invest. So, I want to pose this question “what do we do right now?” Everyone is selling! I’ve seen news articles entitled “Why this stock market sell-off is scarier than 2008”, and the “Dow falls 1,191 points — the most in history”, and “the Dow’s weekly skid is shaping up to be its 5th worst in its 124-year history”
, “US Stocks dive as coronavirus panic mounts” This is all some really scary stuff! Its hard to not be afraid when everyone else is afraid and everyone else is starting to take precautions to protect their profits. Over the past week, I’ve seen all of my profits gained last year be completely wiped out. From 21% in profit, i’m down by 3%. The market place has taken a huge beating and sitting by and not doing anything sounds absolutely absurd. Stocks are crashing right now and my gut instinct is to do the complete opposite of what everyone else is doing.
Here’s another question. What to do when stocks collapse? And, What do we do when there is panic in the stock market? Should we respond out of panic and out of fear and sell everything and lose sight of the reasons why we invested into specific companies and bonds? Here’s a quote from Earl Nightingale “Look at what the majority of people are doing and do the exact opposite, and you’ll probably never go wrong for as long as you live.” I remember missing an opportunity with a foreign stock that I was and still am eligible to purchase and I’m going to share this story and you all are going to call me stupid for not investing, and that’s okay. Why? Because, we learn from our mistakes and boy, did I make a mistake. Anyway, I received a tip from a millionaire (I actually didn’t know that he was a millionaire at that time) that a particular bank stock he was watching had dipped down to just under $1/share and now is the time to invest. Long story short I didn’t because I had my funds invested into US stocks already. Within 1 year, that stock rose to a little more than $2.50/share. When the stock price dropped below $1/share, everyone started panicking and tried to sell to get their money out of it, but a millionaire saw the opportunity and invested into it and doubled his money in less than 1 year.
Next, let’s take a look at what Phil Town says and he calls it a “Rule #1 event”. Phil Town says that we want to identify when something happens that makes the market price of a really good company plummet in value and the key to the value dropping significantly is that the event is temporary. It can’t be that a company has filed bankruptcy and now the stock has suddenly dropped in response to it. Another thing that I’d personally stay away from are companies that are seeing a decrease in foot traffic and they aren’t able to adapt. Prime example, look at Circuit City and Radio Shack vs Best Buy. Best Buy survived for a reason and the story is pretty fascinating. So, the Coronavirus is definitely in my opinion a temporary event that has impacted the travel industry. Now, applying Phil Town’s rule to this, I can see “travel” stocks as a “safe” bet to make a return over the next few months are years. How much further will their stocks go down?? I have no idea and no one has any idea how much more impact the coronavirus will have on the stock market. In fact, I personally believe that we are in the beginning stages, but, I can also be 100% wrong. I’ll give you one reason why I think we are in the beginning stages. Cases of the virus are still just now being confirmed in different countries.
What will I do? Continue investing in the manner which I determined to be affordable to me. I am not going to shift every single penny that I can save and put it into the marketplace. I am not going to empty my emergency savings and put into the marketplace. I’m going to continue with investing the same percentage of my income that I determined to be affordable to me as if nothing is happening.
So guys, what are you all going to do about the drop in the stock market? Are you afraid, are you going to sell, are you going to buy? Are you going to change your strategy?
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