If this market event is a repeat of history, then those with strong holding power who can farm their salary into the financial markets without breaking a sweat will be almost assured a straight path to becoming a millionaire when all this is over.
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"You don’t need conservatism, caution, risk control, discipline, patience, or selectivity. You need (to have) money and the nerve to spend it." Are you daring enough to make the move, and wait patiently for the recovery to come?
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I heard many people commenting that they expect the stock market to fall even more or that it will be a long time before stocks can recover from this shock.
These are not amateur investors, these are fairly good and experienced investors, many of whom often preach the mantra "don't time the market", but suddenly they all become market-timers and predictors of the stock markets.
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Why you should never leverage: now that I have a 100% leveraged portfolio, I have a very real problem. In this market crash, my unrealised losses were dropping at twice the speed of the market. In other words, I was stepping on the gas, while speeding into the abyss.
No amount of fancy charts and complicated tables assuring me that since 1939, the markets always recovered after dropping a single day of 10%, bla bla, every made it in the fog. All I could think of was my portfolio going to zero and getting a margin call from the broker to tell me that I had wiped out my accountThere can’t be a recovery, if there is nothing left in the pot.
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If you ask me where the market would be 10 years out, which is really the minimum timeframe for anyone in 100% equities, I can tell you with a high degree of confidence that your nest egg will be better off than it looks on paper today.
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This is data-evidenced: the stock market always recovers and go up over the long term. We are almost -30% from highs in a bear market. That is a very rare event. The COVID-19 virus is very challenging economically, some governments will do better than others, some countries will take longer than others. But none of this changes the fundamentals of the economic or financial system, which is why the stock market always goes up in the long term. Anchor your goals on that.
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Fast forward to today, my entries are gradually becoming more hesitant and also smaller in size. It’s not because there’s too many things to buy. I am just worried about finishing my precious cash fast and sinking deeper into the red with each coming day.
The reality is not as simple as the theory so kudos to those that made their pots of gold then.
This is like watching a football match and cursing the player when he makes a poor decision. It’s not easy performing good decisions live, in the thick of the action. We are mere mortals.
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At the extreme moments of fear and greed, the power of the daily price momentum and the mood and passions of ‘the crowd’ are tremendously important psychological influences on you. It takes a strong, self confident, emotionally mature person to stand firm against disdain, mockery, and repudiation when the market itself seems to be absolutely confirming that you are both mad and wrong. Also, be obsessive in making sure your facts are right and that you haven’t missed or misunderstood something.
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Meanwhile, innovators are still innovating all over the world. People are staying up late working in labs, vaccines are being tested, genes are being sequenced and the current virus will end up beaten and then written up as a very significant chapter in the history books.
But apart from all of this, there is still way more going on out there, which just isn’t making it to the headlines. Engineers and scientists are still inventing things that will drastically improve the future. Solar panels are still streaming out by the trainload and being installed worldwide. Better and better batteries which will eventually displace all fossil fuel use are evolving. The most efficient factories in history are being built. Gene therapies are advancing which will eventually make a mockery of all of our current health conditions. Internet connectivity and education is becoming more widely available and cheaper which is allowing the next generation of brilliant kids to to grow up and learn faster and do more than you or I could have even dreamed. And all this will happen regardless of the course of the current pandemic.
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Let me repeat. If you can help it. DO. NOT. SELL. PERIOD. Investing during a crash can be scary.
However, the worst thing you can do in a stock market crash like this is to make your paper loss into a real one.
If I was an emotional investor, most likely:
“SH*T!!! I sold right at the bottom! The U.S. stimulus and all the government intervention finally worked! I better get in before it shoots up even more and I miss the rise!”
Then I would have bought it higher than when I sold… as the market begin to come back down again. If I sell, any market movement up will cause me to stress about “Is it the bottom THIS time?” and “What if I will miss the bottom and buy in too late?”
It will become a never-ending cycle of panic buying and selling. Only losers play this game.
Stay invested, save yourself from anxiety and sleepless nights.
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if you buy now and continue buying with funds that you can afford to keep invested over 10-30 years, you are guaranteed to come out ahead
At the moment everything is on sale. Yes maybe it will be on a deeper sale in a few months. But if you’re still working and investing your income over time, the difference that a few months will make will be insignificant in the long term. What’s important is to be invested and continue adding to your investments.
Sitting out and never jumping in is the biggest risk you can take. If you’re still nervous, you can read the story about the world’s worst market timer again.
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Regardless of what the Oracle ends up buying, Buffett can’t time the bottom any better than you or I. He’s made plenty of opportune investments over the years but that doesn’t mean his success hinges on nailing the absolute nadir of the market.
It’s easy to become obsessed with predicting the bottom during a market crash. Positive outcomes during down markets have more to do with your time horizon as an investor than your ability to call the bottom.
When the stock market took a nosedive in the 1960s, one of Buffett’s clients called to warn him that stocks would surely fall further. Buffett responded with two questions:
- If you knew in February that the Dow was going to 865 in May, why didn’t you let me know it then?
- And if you didn’t know what was going to happen during the ensuing three months back in February, how do you know in May?
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It is somewhat laughable to suggest that the current situation will derail the FIRE movement, like what I’ve seen on Twitter-land.
In all honesty, the FIRE community is the best-positioned people on Earth who can weather this storm. We have what it takes to rein in expenses. To craft multiple sources of income. To protect our assets. The resources to ration with. The will to survive with the bare minimum. The mind to plan for emergencies. The perseverance to hunker down for the cold winter.
Not too far in the future, people would be writing about running a Covid simulation against your portfolio to see if it will survive, like it is “normal thing” to do. The FIRE community will be even more resilient than it ever was when this episode is over.
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