Free Investor Survival Kit
It is a challenging time for stock investors. Or is it? Most of our portfolios are deeply red. So what is the upside?
Have a look at the chart below which shows various disasters since 1957. In each of these disasters, investors were consumed by the impending doom. Many sold and lost a lot of money.
Why am I reminding you of disasters past? Trace the red dotted line on the image above. Imagine what happened to those who kept investing monthly during the 1970s, when the stock market didn't move for 10 years? When it finally started to go up again, they had so many shares of great companies in their portfolio. All bought at below average prices. These brave investors are today retired in the Caribbean. Beach front house. Live-in chef. A nanny for the cat.
So you see, it really is the long and steady that triumph.
Here is another sobering chart. For all the noise, excitement - and more recently excruciating pain, innovation stocks are back to the 'boring' Berkshire portfolio. There is no quick shortcut for retail investors. The only shortcut we have is to buy good companies, and then buy them again the next month, and the next month.... repeat for as many decades as possible.
So what about this crash? It is the biggest opportunity to accelerate your wealth creating. Don't sell the dip. Keep to the program. Invest a steady amount into stocks every single month.
I just recorded a podcast with Brian Feroldi, where we discuss long term investing strategies, our worst mistakes and what we learnt from them. I think you may find it a calming and interesting watch or listen:
If you are shouting "There must be something else I can do!" Yes, you are right. In times of market crashes, volatility goes up.
How is that helpful?
Selling options becomes more profitable and lower risk when volatility goes up. I share all my options trades with my students and Patreon members. This year so far, my options trades gave me a 19.45% return, or $3,385 on $17,406 invested. I make small trades with 80%+ probabilities, and reinvest the profits back into my core stock portfolio.
If you want to watch me make these trades, I recorded them for my Master Options students last night. It is an uncut video with warts and all:
When the market crashes, I do this:
1) I tell myself "This is an amazing opportunity to get to my financial goal faster! All the greatest stocks are on sale!"
2) I ramp up my options trades to get more immediate income. I use this extra income to buy more great stocks.
3) Stick to my plan to invest a fixed amount every month in stocks.
4) Zoom out. Look at the first chart again. What seemed bad in 1973, 2000, 2008, 2020 was really a tremendous opportunity to build wealth.
Keep building wealth.
Enjoy a great life.