Have you heard the news? The stock market is down today! The world is ending! The sky is falling! Time to sell your less desirable children into slavery, hoard your gasoline, ammunition, and remember, those left unprepared will be raped.
All kidding aside, I woke to the news today that for whatever reason, the stock market is down. And what does that mean for us precisely? Well, it means that we should tell all our gullible friends to sell so we can buy things at a super-low price. That’s right, as of today, we have a little sale going on in the world. Why is everything on sale? To answer that question, I will steal a quote from Benjamin Gram,
“I don’t know, and I don’t care.”
Hear me out, what I am about to tell you is nothing new. Lots of other smart people have said this exact same thing and they have been right every time. But here is my take, the reason why I will continue to invest when the market crashes, is because over-time the market rebounds stronger. The crash or “market-correction” event gives me a nice opportunity to buy-in to the market. You have heard the saying, “Buy-Low, Sell-High” right? This saying lives on because it’s still relevant, and applicable to today!
Think about it, if the stock market prices never went down, how could we ever afford to buy-into it? Also, this correction is a natural way of the market purging out businesses that are inflated and don’t bring value. That may sound harsh, especially if you own a business that just went under. But in the long-run, this is precisely how the market keeps climbing in value because the businesses that survive are delivering things that people want.
Examine Figure 1 below. This is where my confidence in the stock market comes from. Notice that after each recession, the market climbs exponentially. Whatever is happening in the world today has most likely already happened in the past and in the larger picture, it isn’t a big deal.
Figure 1. Stock Market Trend for the last 90 years
So what if the world does end?
Now let’s say I am wrong. Let’s say that the world is really ending. If that is truly the case, selling your stocks, or money in either situation doesn’t even matter. Nothing really matters since you cannot take your money with you.
In Summary
What does matter is how you react to the hyper 24/7 news cycle feeding you a constant stream of malarkey clogging your judgment adding unnecessary cortisol to your cardiovascular system. Fear is how the news gets views, and their business model is not healthy. Don’t let it get to you. Turn off the news and get on with making your life better thus seizing the opportunities around you. Happy investing everyone!
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Says Joe Cole 