The stock market has been all over the place lately. As of this writing, this December is the worst on record since the Great Depression. There is alot of pessimism and uncertainty out there and if you aren’t careful it can cause you undue stress and anxiety. Some of the reasons for the downturn include:
- Looming trade war with China
- US government partial shut down
- A Federal reserve that continues to raise interest rates
- Slowing global economy
- Overall growing pessimism (my opinion)
All these factors are putting the US stock market on track to turn into a bear market. A bear market is defined as when a market indicator such as the S&P 500 falls from a 20% high.
Given these factors you might be tempted to take your money out of the market and hide it in a CD or stuff it in your mattress. However if you have a long time horizon I believe you should continue investing. I would not recommend putting all your money in one stock but consider ongoing frequent investments in broad indexes such as the S&P 500 or in good companies with strong fundamentals. Think of it as going on sale.
But be smart. If you need to access your cash in the next 18-24 months don’t put it in the market. But if you have a long time horizon these could be some of the best times to slowly increase your position if you do it in a disciplined, methodical fashion. Don’t misunderstand me…these are potentially treacherous times but I choose to push ahead and continue investing. Some of the best investments I made in stocks and in real estate were back in 2008 and 2009 otherwise known as the Great Recession.
Warren Buffet said “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Well let me tell you – there is alot of fear in the market right now. No one knows when it will bounce back. So I say stay the course! Another of my favorite quotes is “He who risks nothing, gains nothing.”
Whatever you do don’t sell into the panic. That is a sure fire way to lose your shirt.
Don’t pass up an opportunity to buy stocks when they are on sale like they are now. I hear a stat recently that shocked me. It said 40% of adults don’t have $400 to cover an unexpected expense. That is truly sobering and sad. If you have the means please consider taking advantage of downturns like this to increase your wealth in the long term. It might get more painful before it gets better but the sun always rises!
Hang in there and remember this too shall pass!
