Last week marked the S&P 500 Index’s worst week since March 2020.
That’s a shocking statistic given where we were almost two years ago and how far we’ve come since then.
The weakness is taking a toll on portfolios across the board. You’re feeling the pain. I’m feeling the pain. And I know how difficult and stressful that can be.
But I promise you… this won’t last forever. Stocks will bounce back.
In the meantime, I encourage you to stay as calm as possible. Do not let emotions take control. Do not panic sell. Trust that you’re invested in strong companies that can weather the volatility.
That’s easier said than done, of course. So let’s talk more about what’s going on in the market and how best to handle the ups and downs…
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Contents
Bitcoin?
Bitcoin fell to a six-month low as cryptocurrencies in general continue to pull back
McCall’s Call: The crypto market is taking a beating as investors continue to sell anything perceived as “risky.” You can see the same action in the stock market – where investors are selling companies regardless of fundamentals.
As a long-term bitcoin bull, I am maintaining my outlook and personal stake in the coin. Unfortunately, high volatility is a common characteristic of the cryptocurrency market.
I have had people from all walks of life reach out to me over the last couple of days, wondering what to do in the crypto space right now. I’ve gotten questions ranging from “should I sell everything?” to “is it finally time to make my first crypto trade?”
My advice today is the same as it was a week ago… and it will be the same tomorrow and likely a month from now, too:
Bitcoin will be higher in 12 months. And that makes buying now a great strategy.
That said, we have to understand that the coin may fall to $25,000 before it bounces back to $50,000. As I mentioned, volatility comes with the territory here. As long as you can stomach the inevitable ups and downs, you should view the current weakness as a fantastic long-term buying opportunity.
Emphasis on the long term.
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The Dow Jones Industrial Average, The S&P 500 Index and the Nasdaq Composite Index
The Dow Jones Industrial Average fell for the seventh consecutive day. The S&P 500 Index has entered correction territory while the Nasdaq Composite Index hit an eight-month low. And the ARK Innovation Fund (ARKK) is down nearly 60%.
McCall’s Call: As you can see, it’s not just the cryptocurrency market getting hit. It’s stocks across the board. We can look at this from two angles…
As a long-term investor, I know that the best strategy is to hold on when stocks pull back and look for opportunities to buy. But as a human being, that’s an almost impossible task.
I have money in stocks just like you do. So when the market falls, I feel it in my wallet and in my gut. I don’t want you to think I’m just some talking head who tells you that everything will be okay and not to panic. Well, I am telling you that… but remember that I’m on this ride, too.
I feel the same pain that you do when I wake up at 5 a.m. and see the futures market down big. I get another punch in the gut when I open my personal brokerage account and see my stocks in the red. I’m driven to make emotional decisions just like you are – but I know not to.
If you are one of those people who cannot handle seeing your portfolio down big without being driven to panic sell, I strongly recommend not looking at your account for a few weeks. That may sound ridiculous, but it’s a good technique to help you cope with corrections. If you trust that you made sound investments, let your stocks ride this out on their own.
Here’s another technique that may help: Write down the reasons why you bought a stock in the first place. If your reasoning is not valid today, mark the stock as a potential sell candidate. Do not sell today… but consider selling on a bounce. On the other hand, if the reasons you invested in a stock in the first place remain valid, you can feel confident holding on through the volatility. Over time, those stocks will move higher again.
I often tell newer investors that when analyzing a stock, ask yourself if you believe the company will be bigger five to seven years from now. If your answer is “yes,” it’s likely a good buy candidate. If your answer is “no,” please don’t buy the stock. You can do this exercise with your current portfolio as well to help keep you on the right path.
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The bottom line is that I know this is difficult. It’s very hard to stay calm and hold on to stocks that are falling and losing you money.
But remember that corrections are a very common occurrence in the stock market. On average, the market experiences a correction every 13 months. So the more experience you have investing… the more corrections you will deal with.
Once you realize that corrections are a typical – and healthy! – part of the market cycle, you’re simply that much closer to becoming a successful long-term investor.