 |
One For The MoneyListen to hear Jonny break down the tips, tricks, and strategies he uses to help clients retire early. Author: Jonny West
Listen to hear Jonny break down the tips, tricks, and strategies he uses to help clients retire early. This is the "easy button" when it comes to early retirement because everything you want and need to know is right here. Jonny will lay it all out in plain English so you can get the details on the actions you can do to put yourself on the best path to early retirement. He'll also interview top real estate, tax, and estate planning and other professionals to provide a comprehensive approach to your retirement planning. Nobody builds wealth by accident. Listen to find out how you can do it on purpose. Language: en Genres: Business, Education, How To, Investing Contact email: Get it Feed URL: Get it iTunes ID: Get it Trailer: |
Listen Now...
How to Use a Bear Market to Your Benefit - Ep #76
Episode 76
Sunday, 15 December, 2024
TRAILERWelcome to episode 76 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode I’ll share how you can use a drop in the stock market to your advantage.In the tips, tricks, and strategies portion I will share a tip regarding year end planning strategies.In this episode...Opportunities in Down Markets [0:59]Investment Strategies During Market Declines [2:55]The Historical Behavior of the Stock Market [11:10]MAINBetter Planning Leads to a Better Life, and that can especially be the case in down markets. Many people fear stock market downturns but hopefully at the end of this episode you are able to see the silver linings amongst the rain clouds. In fact that reminds me of a fantastic quote by one of the worlds most famous investors, Mr. Warren Buffett. He said and I quote ““Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”This speaks to the tremendous opportunities that a down market can present, but you have to have the stomach to handle them. During such times it’s easy to get gripped by fear and I don’t blame people as losses are incredibly hard to stomach. In fact losses are twice as impactful for investors than equivalent gains. Studies have shown that a 10% loss hurts twice as much as a 10% gain. I know this from personal experience when very early in my time as an investor, I purchased a stock which then dropped 50%. I sold out only for the stock since that time to increase over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, when life gives you lemons, stay invested.With a pessimistic mindset, you can make really poor decisions and miss incredibly once-in-a-generation type of opportunities, like I did, but with the right mindset you can see the economic rain storms and instead of running for cover you grab a bucket as Warrant Buffett said so well. And when you employ these better investment strategies it will make for an even better life.Here are the strategies to consider based on how far down the market is. I’ll use each calendar year, January 1st, as the starting point.Here is what one should do when the stock markets are down 5%.If the stock markets are down 5% from where there were on January 1st, there really is nothing one should do other than stay the course. Drops in this magnitude are far more typical than one might imagine. In fact in the last 44 years, the stock market has been down on average 14.2% at some point during the calendar year. So at one point between January 1st and December 31st of every year since 1980, the stock market was down around 14% on average and yet, 33 of those 44 years, the markets ended up higher on December 31st than where it had started on New years day. Most times the best thing you can do is nothing at all. Here is what one should do when the stock markets are down 10% , the definition of a correction. Your first option is to do nothing and stay the course but there are also some ways to take advantage of these likely temporarily lower prices. The first consideration is to rebalance your accounts. For example, let’s say you have identified a portfolio of 80% stocks and 20% bonds to be your ideal portfolio to help achieve your goals. Now let’s also say there is a drop in the stock market of ~10% and this causes the stock holdings to go down to 70% from 80%. Alternatively the bonds portion of your portfolio rises by from 20% to 30% in this hypothetical example. Rebalancing merely, shifts your portfolio back to it’s initial distribution, so 10% of bonds or bond funds are sold and 10%...
