Lessons From Decades Of Investing

| June 28, 2022

The economy and the stock market are both in the dumps right now and people are freaking out.  Volatility and the interest rates are the only things going up.  Times like these are humbling and they remind investors that we’re not the market geniuses we pretend to be.  Retirees and older investors are especially concerned and vulnerable.

Optimizing Purchases

Anyone who has been investing as long as I have has gotten a lot of bumps and bruises along the way.  Stocks, bonds, precious metals and even real estate all have their ups and downs.  Bitcoin and other cryptocurrencies come with crazy volatility.  Anyone who wasn’t prepared for this market correction should probably ignore their investment and find a new distraction.  Better yet, now is a great time to pick up some bargains on stocks that are trading at very attractive valuations.  Everyone knows we should “Buy Low”, but few have the guts to pull the trigger when the market is dropping every day.  I’m buying everything I can afford right now and hoping the bottom is around the corner somewhere.  Many experts predict a looming recession, so maybe I should be holding onto my cash.  Either way, I try to invest continuously and this helped me a lot during the Great Recession.  I bought about as low in 2008 as I’ve seen in my almost four decades as an investor.  If I can do half as well during this downturn, I will be thrilled with the results.

Predicting the Future

The great question in my mind is, will there be a recession near the end of the year or will the election restore some sanity to government and improve our economy?  I did very well with my investments the last two election years, but this year seems very different.  Some big money banks are predicting a recession, including Deutsche Bank, Wells Fargo and Bank of America.  Other banks, including Goldman Sachs and JP Morgan put the chance of a recession at around 35%.  Also, 57% of American CEOs are predicting a recession, so that is pretty ominous.

If I could predict the future of the stock market I would be retired and travelling the world right now, instead of working for the Man.  I believe we can take the lessons of the past to add some clarity to the future.  According to Acorns.com, the average recession since WWII lasted about 11 months.  Unless you need your investments for income right away, it is best to ride it out and add to your portfolio when possible.  If we take a long-term view of the stock market, the high probability is that we will make money if our stocks are carefully selected.  Companies are growing, earnings are solid and there are groundbreaking new products and technologies.

Market Dynamics

Fear & Panic – The easiest way I know to lose money in the stock market is to panic and sell, after the market has already dropped.  It’s hard to avoid the panic induced fear when it’s all over the news and every pundit and reporter are freaking out on TV.  When I was younger broadcasters simply reported the news, but now fear and panic are used as marketing techniques.  When you cut through the drama on TV and in the markets, there are very real reasons the markets have dropped and it may take awhile to turn around.  The perfect time to sell was back in November.  If you sell now, you would likely be selling good stocks at a low valuation, possibly for a loss.

Arrogance & Greed – The second easiest way I know to lose money is to believe you are smarter than the market.  I am the poster child for this and I have made many investing mistakes because of it.  It took years before I came to my senses and learned to go with the momentum.  One common piece of market wisdom is “Don’t Fight the Fed”.  The Fed seems pretty determined to raise interest rates and this is going to tank the markets in the short term.  If you have the time and income, this year could present a sweet buying opportunity.

The Bottom Line

Nobody can reliably predict the stock market, even part of the time.  The good news is that it’s not necessary in order to make a reliable profit.  Choose good investments and invest for the long term, in order to prosper.

This article originally appeared at Hope To Prosper.

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Category: Personal Finance

About the Author ()

My name is Bret Frohlich and I live in San Clemente, California, USA. I’m married, with two adult children and one grandchild. I have been saving and investing since 1985 and I’ve seen nearly every market condition and type of investment. I have worked my way through college, climbed the corporate ladder, crawled out of debt and paid off my mortgage. I am finally nearing financial independence and looking forward to more travel and adventure. My mission in life is to help others on their path to prosperity. If you have ever wondered how to get ahead financially and live a prosperous life, this blog is a great place to start.

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