Is it possible to come out on top when the stock market crashes?Investors are bombarded by information. Unfortunately, some of the most pivotal charts, data and graphs contain misinformation. The financial industry’s mantra is often buy and hold forever; ride the market’s every whim; stick it out through inevitable corrections, crashes and recoveries. It’s time to clear the clutter and get the full story. At Squire, we don’t believe in the industry’s inactive philosophy. Your money is on the line. It’s time to be proactive — by aiming to reduce downside while maximizing upside potential.
It’s time to change your investment mindset. Here’s what you need to know:
Disaster Management: Why Everywhere But the Stock Market?
From airbags, to fire drills, to tornado shelters, people plan for disasters in every area of life. From calling our fears “irrational” to promising that markets “always recover”, the financial industry leads us to believe everything will always be OK, which can leave many unprepared for dangerous market downturns. While stock market crashes and recoveries are inevitable, our experience during the most recent market crash tells us that the smart play is to move your money to safety in the face of an imminent, potentially devastating decline.
Don’t Do the Wrong Thing at the Wrong Time: 9 Pieces of Misinformation
The industry tells investors that attempting to avoid loss through strategic sales is an irrational act, because investors have the tendency to sell at the bottom. We believe that investors are right to worry about massive losses – like the kind that can and do happen during major crashes – that can take exponential gains to recover. Working to protect your investments is never irrational.
Money Velocity: A Key Element in Crash Management
It’s critical to understand velocity of money, a concept that can serve as a warning that may indicate repeated stock market crashes over long-term periods. It seems stock market crashes are significantly more prevalent while velocity is in decline, like it is now.
Do You Really Have to Lose All That Money During Stock Market Crashes?
The common buy-and-hold philosophy tells investors that if they sell to avoid damage, they could lock in losses and miss the inevitable recovery, which is “always” right around the corner. They say history doesn’t repeat but it often rhymes. While past performance is not a guarantee of future results we believe (because of historical analysis and personal experience) that investors can avoid parts of some of the steepest losses and steer their money to safety by establishing threshold-based selling strategies. These strategies are rooted in historical analysis.
Can You See Stock Market Crashes Coming and Do You Have to “Predict” to Succeed?
When inflated prices reach their highest points at the top of the market, a “bubble” can form and will likely to burst at some point, which can trigger steep declines. We help investors discern the difference between a common correction — or a dangerous crash that they would be wise to try to avoid.
The Fatal Flaw with the Buy-and-Hold Strategy
The industry tells investors to weather the market’s highs and lows — but what if one of the lows arrives when you’re set to retire, you get scared and hit the eject button?
Buying Low and Selling High: This is Not Market Timing
Common sense dictates that investors should try to buy low and sell high. Most, however, have been conditioned by industry misinformation to fear selling at all, calling it market timing, even when it could be in their best interest to do so. How do you know the difference?
Must Read: Buying Low, Selling High
2 Stock Market Realities: Which Are We In Now and Do You Know How to Invest in Each Kind?
The industry backs up its buy-and-hold efforts with a chart that shows a steady, left-to-right upward climb throughout the market’s history. There’s another chart, however, which many investors have never seen. That chart shows the first 30 years of the Dow Jones Industrial Average; it is usually ignored. Why? Well it’s certainly not as pretty. Are we in a crash-prone environment or a smooth-upward? It’s important to manage money differently in each.
Must Read: Can You Spot the Misinformation?
“Discovery consists of seeing what everybody has seen and thinking what nobody has thought.”
– Albert Szent-Gyorgi – Nobel Prize Winner