Avoid the Noise

Are You Panicking?

It has been a terrible few days for the stock market. It's hard to avoid the noise and when you look at your investments you will start to doubt the process. Is this the end of the run? Should you cash out now to avoid more losses? Maybe you'll be better off if you just have cash. These are the questions that a lot of investors will ask themselves.

Now I have a question for you. Is there any time in your life that you can remember someone panicking during an emergency situation that somehow made things better?

Fear is an investors worst enemy and it's hard not to be fearful. Just yesterday I read something that said, people who view their investment losses have similar brain activity to people who are actually dying. That's crazy how scary this is for people, so it's understandable that you'd want to make a change. Who in their right mind would want to be that afraid? The only way to not be that afraid is to either not invest (which is a terrible idea), or not pay attention (which is a wonderful idea). Invest properly, follow a financial plan and check once a year and you'll be way happier and less stressed.

This is Normal

I know it doesn't seem like it, but market activity like this is normal and you will have to get used to it if you want to be a successful investor. In your mind you're thinking about selling now and then buying back in when it hits the bottom. In theory, that's a wonderful idea, I wish we could all do that and avoid every single period of time where the market goes down, but it has been proven, time and time again that nobody knows how to do that. If you're working with a guy who claims he can do that, ask him on which exact day the market is going to bottom out and start back up? Then hold him accountable to that day and compare the difference between staying invested and trying to time the market. Also maybe ask him if he's willing to cover the difference if his strategy doesn't work.

The market will always have periods when it goes down, because it has to correct itself from time to time, but it ALWAYS goes up over the long run. Companies will always find a way to make money and grow. If they don't, they will fail and no longer be a part of the market. If you stay patient and are invested properly, you can and will benefit from the long-term growth of businesses all around the world.

How to Proceed?

First, make sure you have a good portfolio that is in-line with your risk-tolerance, and second, stay patient. This will just be a blip on the radar in the long run.

I think people have a better understanding and trust in the real estate market than they do in the stock market, so I like to propose this question.

If you owned a rental property worth $300,000 and the value dropped by 20% to $240,000, would your first instinct be to sell that property?

I highly doubt you would, because you don't want to sell at a loss and lose money. You also fully believe that real estate values will go back up over time. So why don't you think the same way with the stock market? It's just because you can't see and touch it, but I can assure you that every business owner that you own shares in their company can see and touch their business and they are very driven to find a way to bring their value back up.

The only time you lose money is when you sell. Just like the only time you made money is when you sell. How many people told you how much money they made with Bitcoin a month ago? Did they sell at the peak, or do they still own it? Because if they didn't sell at the peak, then they definitely didn't make all of that money they told you they did.

On a Last Note

In the real estate example, what would a smart and savvy investor do in that case? They would probably decide to buy more real estate, because they know it will go back up eventually and that things are on sale.

If you can start thinking about the stock market like that, you might actually begin to enjoy the idea of market corrections, because that is a good time to buy. Maybe you have cash sitting on the sidelines and now is a good time to get in. Or maybe you think it's a good idea to take a small investment loan and see how that feels.

Be greedy when others are fearful, and fearful when others are greedy.
— Warren Buffet