The market lured me in so I have less, but still substantial, cash. Stocks may be overpriced, but they certainly aren’t signaling to exit. Markets are hard, and trying to wait for a "crash" is hard as well. Lately the bounces have been so fast, it is done before you blink.
Signed: Waiting for a Crash
Dear Waiting is Not a Strategy,
If you bought on March 23 (doubtful) then you could be rebalancing now to capture some gains. It’s a very good idea to rebalance your nest egg one to three times a year. At the end of April, if there has been a Spring Rally, you often have beefed up slices that can be trimmed back (selling high). At the end of September (if the current recession deepens), you might find that the slices have slimmed down, at which point you can buy more low.
If you bought recently then you could be suffering from buy high, sell low syndrome. Please take a moment to read my blog on that.
Pie Charts with Annual Rebalancing
The long and the short of it is that market timing doesn’t work – not on the entry or the exit. Our easy pie chart plan with annual rebalancing is a buy low, sell high plan on auto pilot. Also, working with the pie chart system pulls the emotions out of it. That’s one of the reasons why this strategy earned gains in the last two recessions, and has outperformed the bull markets in between.
The plan also benefits from adding in hot industries, being properly diversified and by knowing what is safe in a world where bonds and money market funds are very vulnerable. Both of those assets, and others, were bailed out by the Federal Reserve in March 2020, so you don’t have the luxury of ignorance these days. If you want to be the boss of your money, and adopt a strategy that works, you must know the basics – what I call The ABCs of Money that we all should have received in high school.
It’s Never a Crash
Also, the markets never “crash.” It’s always a series of unfortunate events, followed by mini-rallies. By the time you think we’re in the Apocalypse, that’s usually pretty close to the market bottom. As you can see in the two charts below, it took almost a year and a half for the Great Recession to bottom out, and over two years for the Dot Com Recession to “plunge” to its depths.
The general trend was downward in both recessions. However, each “event” caused a knife-like drop, with a mini-rally thereafter. The "smart" money typically moves a few months before the headline. Before the first Safer at Home Order was issued in the U.S., a boatload of CEOs had already resigned their positions. Wall Street was on a selling spree for four months before Bear Stearns collapsed. If you wait for the headlines, you'll always be late. (That's where a balanced plan and annual rebalancing protect you, while allowing you to capture your gains.) Wall Street insiders already know that the recession becomes official on July 30, 2020, with the final revision at the end of September 2020.
There was a Santa Rally after 9.11 that posted 10.4% returns. Bear Stearns collapsed on March 16, 2008, after a multi-month market plunge that began in November 2007 and cost investors -15.5% in losses. Wall Street then attempted another little rally, with April and May posting 5.84% gains. That seduction was quite expensive, however. The Dow Jones Industrial Average ultimately bottomed out at 6537 on March 9, 2009, with losses of -55% from the top in October 2007 to the bottom. The losses in the Nasdaq Composite Index during the Dot Com Recession were 78%. It took that index 15 years to crawl back to its March 2000 highs.
So, it’s best not to be
* Seduced by the Wall Street rollercoaster
* Lured into another high-risk venture by fright from the Bitcoin and Gold Bugs
* Googly-eyed over a get-rich-quick scheme involving AI or cannabis
* Suckered into an “income-producing” (but capital-losing) dividend fund
It is far better to let wisdom and time-proven systems be your guide. You can invest in things you believe are hot, within reason. There is a plan that allows you to play the hots, earn an income (safely, without capital loss) and even save thousands annually by adopting the wealth strategies of the rich.
Call 310-430-2397 or email info@NataliePace.com to join us at our June 13-15, 2020 Financial Empowerment Retreat. Get the best price when you register by May 31, 2020.
One more thing. It’s a good idea to watch (or review) my interview with Howard Silverblatt, the senior index analyst of the S&P500®. His quote is: “As far as P/E goes, let me get a tissue because I think I’m going to have a nosebleed. We’re so high now.”
Other Blogs of Interest
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure.
Are You Worried About Money?
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Recession Proof Your Life. Free Videocon Monday, May 10, 2020.
The Recession will be Announced on July 30, 2020.
Apple Reports Terrible Earnings.
We Are in a Recession.
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High.
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X.
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
2020 Investor IQ Test.
Answers to the 2020 Investor IQ Test.
The Cannabis Capital Crunch and Stock Meltdown.
Does Your Commute Pollute More Than Planes?
Are Health Care Costs Killing Your Budget?
2020 Crystal Ball.
The Benefits of Living Green. Featuring H.R.H. The Prince of Wales' Twin Eco Communities.
What Love, Time and Charity Have to do with our Commonwealth. Interview with MacArthur Genius Award Winner Kevin Murphy.
Unicorns Yesterday. Fairy Tales Today. IPO Losses Top $100 Billion.
Counting Blessings on Thanksgiving.
Real Estate Prices Decline.
Hong Kong Slides into a Recession. China Slows.
They Trusted Him. Now He Doesn't Return Phone Calls.
Beyond Meat's Shares Dive 67% in 2 Months.
Will There be a Santa Rally? It's Up to Apple.
Will JP Morgan Implode on Fairy Tales and Unicorns.
Harness Your Emotions for Successful Investing.
What the Ford Downgrade Means for Main Street.
The Dow Dropped Over 1000 Points
Do We Talk Ourselves into Recessions? Interview with Nobel Prize Winning Economist Robert J. Shiller.
Ford is Downgraded to Junk.
From Buried Alive in Bill to Buying Your Own Island.
The Manufacturing Recession. An Interview with Liz Ann Sonders.
Gold Mining ETFs Have Doubled.
The Gold Bull Market Has Begun.
The We Work IPO.
The Highs and Hangovers of Investing in Cannabis.
Recession Proof Your Life.
China Takes a Bite Out of Apple Sales.
Will the Dow Hit 30,000? A Check Up on the Economy
Red Flags in the Boeing 2Q 2019 Earnings Report
The Weakening Economy.
Think Capture Gains, Not Stop Losses.
Buy and Hold Works. Right?
Wall Street Secrets Your Broker Isn't Telling You.
Unaffordability: The Unspoken Housing Crisis in America.
Are You Being Pressured to Buy a Home or Stocks?
What's Your Exit Strategy?
It's Time To Do Your Annual Rebalancing.
Cannabis Crashes. Should You Get High Again?
Are You Suffering From Buy High, Sell Low Mentality?
Financial Engineering is Not Real Growth.
The Zoom IPO.
10 Rally Killers. Fix the Roof While the Sun is Shining.
Uber vs. Lyft. Which IPO Will Drive Returns?
Boeing Cuts 737 Production by 20%.
Earth Gratitude This Earth Day.
Real Estate is Back to an All-Time High.
The Lyft IPO Hits Wall Street. Should you take a ride?
Cannabis Doubles. Did you miss the party?
12 Investing Mistakes
Drowning in Debt? Get Solutions.
CBD Oil for Sale.
The High Cost of Free Advice.
Apple's Real Problem in China: Huawei.
2018 is the Worst December Since the Great Depression.
Will the Feds Raise Interest Rates? Should They? Learn what you're not being told in the MSM.
Why FANG, Banks and Your Value Funds Are in Trouble.
Russia Dumps Treasuries and Buys Gold
OPEC and Russia Cut Oil Production.
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.