Searching for a Silver Lining

Doom and gloom, it’s everywhere you look. Masks, gloves, and maybe soon, hazmat suits may become the fashion of the day.  

Early adherence to the early warnings would have been a wise choice by packing the house with all the essentials and using what precious time you had available. And, once you had everything in place, you could contemplate your investments and enjoy the free education about economics and the market available on thousands of websites.

For first-timers, we’ll give you a break, the whipsaw action of the market isn’t kind to a newbie’s psyche and could feel more like a baptism by fire, but still, there are lessons to be learned for a lifetime.
First and foremost—DON’T SELL ANYTHING! Losers panic, while the smart money plans.

There is much to be learned in how to evaluate the economy by reading, listening, and watching the best and brightest in the financial industry. It’s also important to keep emotions out of financial decisions. It’s a strategy that will serve you well.

During the last major market crash (September 29, 2008), I had bailed on a portfolio of stocks just in time to avoid the pain. Some call it timing, while others claimed it to be luck. I remember asking myself two questions before the meltdown; is owning a home a right or a privilege, and does everyone deserve credit regardless of their financial history? The answer was easy to calculate, and I saw the writing on the wall and realized we were going to slam into it very soon. The banks and mortgage lenders would give anyone a pulse a loan, and as for down payments—what were those, they seemed unimportant and were overlooked.

So, you might wonder what I did with the cash I was sitting around. First, I invested in real estate, paid off mortgages, and sat on the rest of the money for a long time. The problem I ran into was I became distrustful of the market and missed the run-up of the bull-market; albeit, I slept well.

I finally got back into equities, and once I found that the water was safe and I began to study and follow trends, I also went back and reacquainted myself with some of the new guys who were armed with analytic models that made some sound predictions about where the market was heading.

One important rule I learned from the Oracle of Omaha—Warren Buffet was to buy companies, not stocks, and hold on to them for the long haul. If you take a look at this advice, you’ll find that when the market melts, and a bear follows, it is the wise investor who dollar-cost averages, or at the very least, holds their positions and refrains from panic selling.

Another great investor worth mentioning—and whom I am a big fan of—is investment rock star Peter Lynch of Fidelity Investments. One of the greatest mutual fund managers of all-time, Lynch earned an average of 29.2 percent return for his clients through the Magellan Fund between 1977-1990.

What separates his ‘genius’ from others is his investment principle, “Invest in what you know.” This advice always made sense to me and resulted in my investing money into companies I understood, or at least, I could see they had created a revolutionary product or service.

Today, we have to wonder what the future will look like; should we consider investing in space travel, driverless electric cars, or clean water? As far-reaching as these ideas seem today, for those genuinely interested in long-term investing, these concepts and the companies who will become leaders in their categories should be considered for portfolios of the future.  

Many seasoned investors are quietly maneuvering around the market, and so it may be time for you to start selecting solid stocks that you have an understanding of and buy them to own for the next five years.

Think about global air travel, bio-medical treatments, long-lasting battery manufacturing, and technology. The best investors are taking small bites from the apple, and even if they don’t get the lowest price on every purchase, they’re adding to their positions slowly and cautiously so that in the end, they have a dollar-cost average on their side.

It takes a stomach of steel to buy stocks when they are falling like heavy rain, and this is when emotions need to be checked at the door. For those engulfed by fear, consider an ETF or mutual fund, which are excellent methods for attaining benefits of capital appreciation without losing too much sleep.

As a contrarian, I see the cup half-full and great buying opportunities; how about you?