Go for a walk. Step out on the porch or stoop for a minute. Turn off the news and relax. Read this first, of course. But then, take a break, asserts Jason Williams, growth and income expert and editor of Wealth Daily.
It’s tough to keep your emotions in check when there’s a 24-hour news cycle that profits from getting your emotions out of control. And it’s even harder to take advice from people who are telling you to buy certain stocks because they’re not going to go down as much as other stocks.
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If you’re losing money, you’re losing money. It’s not a win just because you lost less. But they’re right to be telling you to buy. This is the time when fortunes will be made.
Stocks are like houses. You don’t ever make money when you sell them. You make it when you buy them for less than their true value.
You make money on a house if you paid less per square foot than similar houses in similar places sell for. It’s the same with stocks. You make money on them when you buy them for less than what they’re worth. And right now, most of the market is selling for way less than what it’s worth.
In December 2018, the S&P got down as far as 2,300 and change. And I can see it dipping down to there before we’re all done here. I’m really not entirely sure where the next resistance level would fall. But I am sure I don’t want to see us test it. And I’m concerned we might.
But then you get into the whole trying to catch a falling knife thing. Are you gonna grab the handle? Or are you gonna slice your fingers off on the blade? Here is what I’m thinking about investing in:
Is Bank of America (BAC) going to drop lower than $20? It very well might. But five years from now, when it’s trading for $45 a share, are you going to be happy you bought at $20 or upset you didn’t buy at $19?
Buying stocks when they’re low always sets you up for the chance of taking more losses before you start to gain. But it’s people who are willing to take a small loss right now who will be cashing out the big gains down the road.
The next Warren Buffet might be loading up on Apple (AAPL), Cisco (CSCO), and Southwest (LUV) shares right now. And that person might watch those investments drop another 10%, maybe even 20%. But she’ll keep adding shares and 10 years from now, she’ll be known as one of the greatest investors of her time.
So, I’m another person telling you to buy. But don’t buy it all at once. This drop isn’t over and I don’t know where it’ll end. Make a list of stocks you’d like to buy when all this is over. I’ve got one.
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I’m going to pick up Bank of America at 2016 price levels. I’m adding shares of Cisco and locking in a super-high dividend yield from them. I’m looking at Southwest and the other airlines.
My old corporate home, Morgan Stanley (MS), is priced lower than it’s been since 2016. I’m not buying it yet, but I’m sure I’ll add some shares before all this is over.
I’ve been talking about the cruise lines with one of the founders of Angel Publishing (our parent company). The cruise ships laden with infected passengers are sinking those stocks as fast as the planes laden with terrorists crashed airline stocks after 9/11.
Carnival (CCL) is down over 65% year-to-date. But when people start feeling like it’s safe to travel again, you can bet they’re going to be booking a lot of vacations all at once. There’s only one cure for the kind of cabin fever a months’ long self-quarantine causes.
But for now, I’m keeping my shorts on and my extra cash on the sidelines. I’m making my list and setting buy targets. I’m not worried about catching the bottom; I’m worried about buying quality companies for less than their true worth.
And while you or I may not become the next Warren Buffett from this drop, we’ll be a whole lot closer to his net worth a few years down the line.
And who knows, the next Warren might really be reading this right now. It really might be you. After all, he did make over 99% of his fortune after he turned 50.
So, don’t panic. Set up some short positions to hedge against more losses. Make a list of stocks you want to buy and decide where you’d be happy buying them.
Don’t try to wait for a bottom or you’ll miss it. Pick your happy prices and execute. Then don’t look at your account for a few weeks. And remember: It’s all going to be OK. It’s not different this time. We’ve come back from worse.
