There is opportunity no matter what happens in the stock market. In a previous post, I talked about how taking too much risk in the stock market at the wrong time can shred your life savings. If you experienced downturns in the past, you probably learned this painful but valuable lesson several years ago. I learned this valuable lesson during the dot com bubble 20 years ago. Also, in a previous post, I shared the eye-opening fact that if the stock market drops 50%, then it has to gain 100% just to break even. I am now going to show how you can take advantage by buying into a falling market like this.

Consider the following set of loss/gain percentage pairs. If from peak to trough the stock market (or individual stocks for that matter):

• loses 20%, then, if you are fully invested at the time, you will gain 25% at the break even point (not including dividends)

• loses 25%, then, if you are fully invested at the time, you will gain 33% at the break even point (not including dividends)

• loses 33%, then, if you are fully invested at the time, you will gain 50% at the break even point (not including dividends). This is about where the stock market is right now.

• loses 50%, then, if you are fully invested at the time, you will gain 100% at the break even point (not including dividends)

• loses 75%, then, if you are fully invested at the time, you will gain 300% at the break even point (not including dividends)

Most of the time it takes just a few years for the stock market to recover to its previous high. So, it helps to not only have a loss mitigation strategy in your stock market investing toolbox but also a strategy for buying into stock market downturns.

No one knows where the bottom will be in this current downturn, but I just continue buying into the market as new lows are experienced. I am currently about 35% invested and plan to grow that over time. Now, although I learned a valuable lesson during the 2000-2002 dot com bubble which helped a lot during the 2007-2009 financial crisis, the additional lesson I learned from the financial crisis which I plan to apply to this downturn is resisting the urge to sell too early. This time I plan to buy into the stock market and hold it for a lengthy period of time. To be a successful investor you have to evolve and adjust your approaches over time. Because, no matter what happens, there are lessons to be learned and ways to improve performance.

Now, if you were getting fairly close to reaching your financial goals, prior to this current downtown, and found you’ve been taking too much risk, well, learn these valuable lessons now and make adjustments for the future and it will help you tremendously. If you are a long distance from reaching your financial goals or are a new or future investor then learn these lessons for the years to come and remember to reduce your risk as you begin approaching your financial goals and then buy into downturns so you can capitalize on them. Remember, there is opportunity no matter what happens in the stock market.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing (https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/).

Make it your goal to learn these investment techniques so that you can progress towards achieving the financial freedom and independence you’ve always dreamed of.

#stocks #investing #stockmarket #success

There is opportunity no matter what happens in the stock market. One of the worst things you can be as an investor is an emotional investor. So, try to get your emotions out of it and execute with a sense of discipline.   Fortunately for me, I’m still strongly in positive territory for 2020 which is not bad given that the overall stock market has taken quite a tumble.

Over the past year I’ve been employing my stock market correction strategy which involves shorting the overall stock market and selling periodic gains and repeating this (I used the UVXY to short the market).  

At the beginning of March, I switched things up and started using my bear market strategy which involves buying into the stock market a little at a time, selling significant rallies, and then continuing to buy into the stock market until it appears to go through a bottoming process. I first developed this strategy after the 2000-2002 dot com bubble. I lost a lot of money then (as most people did).   My first use of this strategy was during the 2007-2009 financial crisis and I did much better than I did during the dot com bubble. Since then I have refined it a bit more. We’ll see how well it works this time. Hopefully, the refinements will allow me to do even better this time than I did during the financial crisis.

To be a successful investor you have to evolve and adjust your approaches over time. Because, no matter what happens, there are lessons to be learned and ways to improve performance.   The reason I developed this bear market strategy is because once the overall stock market loses a significant percentage of its value, it takes a much larger gain to break even. Consider the following set of loss/gain percentage pairs. If from peak to trough the stock market (or individual stocks for that matter):  

• loses 20%, then it has to gain 25% to break even

• loses 25%, then it has to gain 33.3% to break even

• loses 33%, then it has to gain 50% to break even

• loses 50%, then it has to gain 100% to break even

• loses 75%, then it has to gain 300% to break even

So, it helps to have a loss mitigation strategy in your stock market investing toolbox.   Another disciplined approach I’ve used as a loss mitigation strategy involves the following:  

•  Case #1: If a majority of my investment account is invested in the stock market, I ask myself, based on where the overall stock market is right now (e.g., the S&P 500 Index is what I frequently use), what is the probability of the next 10%+ move in the stock market being down? If I assign a 15% probability of this happening (which means I think there’s an 85% probability of the stock market going up by this much), then I adjust my investment account such that 15% of it is in cash (or other low risk alternatives).

• Case #2: If a majority of my investment account has been cashed out, I ask myself the opposite: based on where the overall stock market is right now (e.g., the S&P 500 Index), what is the probability of the next 10%+ move in the stock market being up? If I assign a 20% probability of this happening (which means I think there’s an 80% probability of the stock market going down by this much), then I adjust my investment account such that 20% is invested (and 80% remains in cash or other low risk alternatives). I invest in individual stocks, index funds, and other stock alternatives at times. Index funds tend to move with the market indexes they track while individual stocks tend to exaggerate the moves higher or lower by the market indexes.

• Case #3: If my investment account is only 50% invested in the stock market, then I ask myself: based on where the overall stock market is right now (e.g., the S&P 500 Index), is it more likely for the next 10%+ move in the stock market to be up (Case #2 above) or down (Case #1 above)? I then assign a probability and make adjustments to my investment account accordingly as shown above.

 It’s not easy assigning probabilities (and being right), so many people might be tempted to just stay put. However, you should at least be mindful of the appropriate risk you should be taking given where you are today. If you are a long way from reaching your financial goal, then a majority of your investment account should be invested in the stock market for much of the time (Case #1 above). If you are close to reaching your financial goal, then a majority of your investment account should be cashed out or invested in low risk alternatives for much of the time (Case #2 above).  

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing (https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/).

Make it your goal to learn these investment techniques so that you can progress towards achieving the financial freedom and independence you’ve always dreamed of.

#stocks #investing #stockmarket #success

I wanted to offer something which might be helpful to some of you because a lot of people are freaking out about the stock market right now. But there is opportunity no matter what happens in the stock market. One of the worst things you can be as an investor is an emotional investor. So, try to get your emotions out of it and execute with a sense of discipline. Here’s a disciplined investing approach you can try which I’ve used which might be helpful:

• Case #1: If a majority of your investment account is invested in the stock market, ask yourself, based on where the overall stock market is right now (e.g., the S&P 500 Index is what I frequently use), what is the probability of the next 10%+ move in the stock market being down? If you assign a 15% probability of this happening (which means you think there’s an 85% probability of the stock market going up by this much), then adjust your investment account such that 15% of it is in cash (or other low risk alternatives).

• Case #2: If a majority of your investment account has been cashed out, ask yourself the opposite: based on where the overall stock market is right now (e.g., the S&P 500 Index), what is the probability of the next 10%+ move in the stock market being up? If you assign a 20% probability of this happening (which means you think there’s an 80% probability of the stock market going down by this much), then adjust your investment account such that 20% is invested (and 80% remains in cash or other low risk alternatives).  You can invest in individual stocks, index funds, and other stock alternatives. Index funds tend to move with the market indexes they track while individual stocks tend to exaggerate the moves higher or lower by the market indexes.  

• Case #3: If your investment account is only 50% invested in the stock market, then ask yourself: based on where the overall stock market is right now (e.g., the S&P 500 Index), is it more likely for the next 10%+ move in the stock market to be up (Case #2 above) or down (Case #1 above)? You would then assign a probability and make adjustments to your investment account accordingly as shown above.  

It’s not easy assigning probabilities (and being right), so many people might be tempted to just stay put. However, you should at least be mindful of the appropriate risk you should be taking given where you are today. If you are a long way from reaching your  financial goal, then a majority of your investment account should be invested in the stock market for much of the time (Case #1 above). If you are close to reaching your  financial goal, then a majority of your investment account should be cashed out or invested in low risk alternatives for much of the time (Case #2 above).

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing (https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/).

Make it your goal to learn these investment techniques so that you can progress towards achieving the financial freedom and independence you’ve always dreamed of.

#stocks #investing #stockmarket #success

Always be cautious about finance and investing statistics. I can’t tell you how many times I’ve read something like: “Stock X fell 75% last year and is now up 150% this year!”

Hooray! Let’s break out the wine glasses then! Oh, but wait a minute. If I started out with $100 on Stock X, and it dropped 75%, that means I ended the year with $25.00. Now, if Stock X has jumped 150% this year, that means I now only have about $62.50 which is still about 38% less than what I started with.

Yeah. You might want to put those wine glasses away for another couple of years or so. This is why when you are nearing your investment goals that protecting your gains becomes of the utmost importance. So, always remember this, learn this valuable lesson, and don’t be misled by finance and investing statistics such as the above.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing (https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/).

Make it your goal to learn these investment techniques so that you can progress towards achieving the financial freedom and independence you’ve always dreamed of.

#stocks #investing #stockmarket #success

I would argue that perhaps the worst trait you can have as an investor is overconfidence. Many investors who experience outsized gains, attribute this success to their superior knowledge, skills, and expertise. The resulting overconfidence often leads to excessive risk taking and catastrophic failures in future years.

It’s okay to make an educated guess on how you think things might go and to position yourself accordingly, but never bank on it 100%. Because the finance and investing world is influenced by a complex, dynamic multitude of variables. And while some of these might be somewhat apparent, many others will not be. And the combined interactions and overall effects across these can result in outcomes far different than you might have initially anticipated.

So, while I do spend time trying to predict how things might go and positioning myself accordingly, it’s never 100%. If I feel very strongly about something, I might go as far as 70% (if that). I then simply observe and react to whatever happens instead of sticking to some static initial position.

As such, either way things go – whether up or down – I always have a plan. If the opposite happens from what I anticipated and positioned for, I’ll still earn gains. Just not as much as I would had things gone my way. And it’s this flexibility of approach which can lead to steady and consistent gains over time. Because you never know what might actually happen even though you might think you do. And coming to this realization can be one of the most important lessons you can learn as an investor. Simply have a plan no matter which way things might go and react to whatever happens however it happens. If you do this, you will earn steady and consistent gains over the years and decades of your life.

You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing (https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/).

Make it your goal to learn these investment techniques so that you can progress towards achieving the financial freedom and independence you’ve always dreamed of.

#stocks #investing #stockmarket #success