The market will turn down.
That is a given.
The market turning down is never a problem, the problem happens when you don’t know what to do when it turns down.
Watch this video to know what to do when the market turns down.
We have so much hype going down. The media LOVES DRAMA!
“Oh, the market’s going to crash.”
“We’re going into recession.”
“Donald Trump’s done something”
“Are we Brexiting, or aren’t we?”
“Boris is WHAT?”
The reality is there’s always stuff going on and there’s always things that make the markets react.
I’m not only referring to the stock market, all asset markets react to external noise. The investment property markets, business markets, currency markets, commodity markets, loan markets etc. The only difference being that the stock market, the currency markets and the commodity markets are all highly liquid, highly accessible and so react faster and with more visibility than the other markets.
It can get quite terrifying if we allow ourselves to get caught up with the hype and even worse if we believe the market direction is personal and use words like – the market has turned against me!
The reality is, there are times when the market’s going up and called a bull market. That’s when we see the stock market value going up, the bull with his horns is going up and everybody’s celebrating.
Then it turns and we go into the bear market, the big grizzly, grumpy bear. The bear market is when the markets go down.
That’s what happens. Markets go up, they go down, they go up, down, up, down but generally, over the longer term there’s an upward trend.
What to do when the BULL turns into a grizzly BEAR
Step 1: Don’t get sucked into the drama and don’t take it personally.
Realise that despite what the headlines say, the market is NOT turning against US. The market is just turning.
This is really important to grasp. If we think it’s about us and believe our wellbeing is at risk we can go into fight-or-flight mode, which is so, so dangerous and really bad for our wealth.
Nobody makes considered decisions with loads of adrenaline pumping through their veins.
Step 2: Accept that it’s natural for markets to go up and down.
Sometimes those up-and-downs are bigger than other times. We can use emotive words and call them “market crises”, “market crashes” or “market falls” like the Black Tuesday crash in October 1929, Black Monday crash in October ‘87, the Asian Crisis of 1998, the dotcom crash of 2000, and the Credit Crisis Crash of 2008.
You have big dips (and big rises) and small dips (and small rises). When the dips happen I get flooded with Facebook messages and emails along the lines of…
“Ann, this is terrible! My portfolio’s losing money.”
What do we do when this happens?
Remember Step 1. : Stop getting sucked into the hype and drama.
Manage your emotions, and stop putting yourself into situations that may trigger your fight or flight mode. I’m not saying be ignorant about what is going on in the world, but manage it on your terms.
And if you really, really must go onto your online broker and check on your portfolio value, which I recommend you don’t, please be careful of catastrophizing!
If the value has gone down you haven’t lost anything. This is just called a paper loss. It’s unrealized, it’s just the current valuation of your portfolio at that moment based on the value of the shares in the market is at specific time.
You haven’t lost anything because you haven’t sold.
If you let the scared lizard brain that wants to fight or flight take control, you might panic and do the very worst thing you could do, which is sell your holdings and realise the loss.
In the moment of panic you turn a theoretical paper reduction into a real loss!
One of the greatest benefits of stock market investing, it’s easy of access and high liquidity is also its downfall.
Because of the ease of access, because of the high liquidity, because of the internet and access to minute by minute, second by second information, we have these moment-by-moment valuations which you can’t get on a business or even on the property market. This makes the novice investor nervous and makes people believe the myth that stock market investing is very, very scary.
Step 3: Remember your wealth plan is not dependent on one fund or one investment
You have emergency funds, you have cash safety nets, you have your investments that are designed for growth, you have less volatile investments for the money you’ll need in the next three years, you have investments in different asset classes, different geographic zones and different sectors.
You structure your wealth plan so that any money you need in the next month or the next year, isn’t impacted by market fluctuations. Why would you stress about the market going down for a little while when it’s irrelevant to your long term financial wellbeing? That’s the whole point of having a structured portfolio and wealth plan, so you no longer stress about the money stuff.
Step 4: Stick to your strategy.
This is why we put in place automated investment strategies.
Putting in place a regular automated investment plan with monies going into a portfolio of index trackers is the smartest thing you can do.
Creating real sustainable wealth is all about rhythm and consistency.
It’s the wealth equivalent of Mr Miyagi’s “wax on, wax off”
You must have a wealth strategy and follow it.
Having a strategy, automating it as much as possible, and sticking with it gives you the framework to counter the irrational emotions and the fears that sabotage so many people’s wealth journey.
The whole point of regular investing means that when the market’s going down, you keep buying and when the markets going up you keep buying and when the market goes sideways you keep buying.
Stopping investing in the market when it goes down is the VERY WORST THING YOU CAN DO!
Because when the market’s going down, you get more from your money. The market is having a gigantic sale and you get to scoop up loads of juicy shares in great companies at a big discount.
When you have your regular investing in place, and the market turns down (not against you – just down) you celebrate because you’re getting more for your money.
Step 5: Do what ever you can to increase your monthly contributions.
Put more into the market in the downturn because it’s on sale.
Find ways to reduce your expenses, look at your outflow and Squeeze the Juice .
Do the work to reduce your ongoing expenses so you can allocate more to your investment, which is going to get you more for your money in the down market and that’s going to get you to freedom faster than panicking and sitting on the sideline.
The market turns, and it always does, you will be in the market instead of everybody else sitting in fear on the outside. They will then turn to you and go “wow, how are you getting these amazing long-term returns?” and you’ll say “because I stuck with the principles of sustainable wealth creation”.
That’s your 5 step plan of action to take when the market turns!
I’d love to know in the comments below:
- If you’ve fallen for the negative hype of the past, and that’s made you make poor financial choices, what or who do you need to stop listening to?
- If you don’t yet have your automated regular investing in place, if you don’t have a holistic financial wellbeing plan in place, when are you going to start and what are you going to start with?
Thanks as always for reading, watching and sharing so generously and for choosing to master this key ingredient money so that you can live your juiciest life.
To learn how to put your automated regular investment strategy in place, know what to invest in and how to structure your portfolio, join me on this FREE Savvy Investing Masterclass.