We finally experienced some capitulation in the global markets last week as the last day of July 2014 erased 2.09% of the Nasdaq, 1.7% of the S&P 500 and 1.88% of the Dow gains for the year (the blue-chip average is now negative for 2014).
Aren’t you excited? We can finally celebrate! What?! You mean you haven’t been reading the headlines plastered all over the financial press for the last year and a half that a 10% to 20% correction is coming to the market and coming soon?
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Well, if you’ve had your blinders on or have just been staying consistent and investing every month or if you’ve been patiently waiting for the other shoe to drop, here’s your chance to join the mosh pit.
These are the five reasons I love a “melty” market:
1. I’m Playing the Long Game
The money I have invested in the stock market is not money I’m withdrawing this month to buy school supplies, pay my bills or take a vacation this fall. It’s money I’ll need in 10 or 15 years for our year abroad and for the kids’ college experience. Although I look at my investments pretty regularly (ok, every day), I own those investments because of a long-game approach. In some cases, I am investing in the growth of an amazing technology company, in other cases, I’m investing in a company because it’s ‘paying me to wait’ via a dividend. When you’re playing the long game, you expect a few bumps along the way; it’s just how the game works.
2. I Shop the Sale
I used to go shopping when it was necessary or when the mood hit me. The weather turns chilly, I’d remember I need a winter jacket, and I’d go to the store and pay full price. It’s fall, I see gorgeous leather bags in the fashion magazines and store windows so I viscerally have to have one and I’d go to the store and pay full price. You might have noticed that the same patterns happen in the stock market. Everyone talking and writing about some gorgeous company with the world’s smartest CEO and a trillion-dollar market opportunity. So you go to the market and pay full price.
But I don’t play that game anymore. These days, I buy the companies I like when they’re out of favor. When the Street hates them. When they are shunned and under*appreciated. And when they are on sale.
3. I am Smarter than a Sheep
The sheep is a very social animal that instinctively flocks with other sheep all the time. Sheep become highly agitated if they are separated from the rest of their flock. When one sheep moves, the rest will follow, even if it is not a good idea. The flocking and following instinct of sheep is so strong that in 2005, 450 sheep jumped off of a cliff in eastern Turkey.
I consider myself to be pretty social, but I hate crowds. And I have seen my share of financial-related cliff diving in twenty-plus years of investing.
I am committed to the Divine Principles of Investing- and two of them come into play here:
“Take Responsibility” This is your hard-earned money. Even if your brother-in-law’s uncle’s mother told you about the investment that’s tanking today – it’s not her fault or her issue. It’s yours, you own it. When you enter an investment, know what you are aiming for in the exit. If the investment becomes untenable for one reason or another, it is your job to do the following:
- exit the investment
-dust yourself off
-understand what went wrong, and why you’re not going to make the same mistake twice.
“Nimbilicious” things always take longer and cost more than you imagined in the first place. Being Nimbilicious is about being flexible, being open to learning and going with the ebb and flow of things you cannot control. It’s also about having an amazing journey.
4. I Pull Out My Wish List
You know all those companies’ whose stock prices and market caps were through the roof? Well, once they’ve been smacked down, it may just be time to take a look at them again. Are they a better long term value now? Is there a higher yielding dividend? Do some research and get involved.
5. The Sky Is Always Falling Somewhere
Remember how frightening it was back in 2008 when the global markets fell apart? It seemed as if life as we knew it would end. Business investment came to a screeching halt. Markets seized up all over the world. Lots of businesses were propped up by government interference. Other things bounced back, albeit slowly. Things revert back to normal. Buffett, Icahn, Soros and other super successful investors made huge bets during the crisis. Did you?
Crisis is always happening. Economic Crisis, Geopolitical Crisis, Resource Crisis; they move markets. But history shows us that eventually, markets revert back.
Time to fall in love with the meltdown.