Do You Care About The Stock Market? Read This.

If you think the recent correction in the stock market is bad, you are right. Watching your net worth drop, especially while gas prices are going through the roof is no walk in the park.

But take a short trip down memory lane with me. Maybe it can provide a little insight to help you make better decisions.

When I became a stockbroker in 1981, mortgage interest was close to 17% and the insured money markets paid 20%. No one was buying shares.

In my first year in business, the market dropped more than 20% – and that was just the beginning of many corrections and bear markets that I have seen while working on Wall Street and in personal finance:

• I was still a stock trader in 1987, when the market dropped about 23%. in one day: Oct. 19, 1987, otherwise known as Black Monday.
• I was providing market commentary for the Cincinnati Fox affiliate during the dot-com crash of 2001-2002, when the Nasdaq composite index fell nearly 76%.
• I was providing market commentary for the West Palm Beach ABC affiliate on 9/11. On the first trading day after the market opened, it fell by about 7%.
• I was working right here at MoneyTalksNews.com when inflation hit. From October 9, 2007 to March 2009, the market lost nearly 50%.

And now here I am, 45 years later at age 70, watching my retirement savings get wiped out by our war with Iran.

So, what have I learned from decades of occasional financial killings?

One thing I have learned is the US economy and stock market is encouraging. When I started as a stock trader in 1981, the Dow Jones Industrial Average was about 1,000 points. Until this latest pullback, it was approaching 50 times that level.

Another thing I learned: Don’t try to time the market. Even if I see potential problems ahead, I am not smart enough to exit the market and go back down. Therefore, staying invested, at least partially, is the only strategy that makes sense.

Finally, I’ve learned that when you’re confused and the urge to sell is almost irresistible, you’re probably getting closer to buying time. From an article I wrote called “The Golden Rules of Becoming a Millionaire”:

“The cyclical nature of our economy guarantees that bad times will happen from time to time, and human nature all but guarantees that when bad times do happen, most people will freeze like a deer in the headlights. But the downturn is the time you save us.

If you think the world is really ending, buy canned food and a gun. If not, step up. As billionaire investor Warren Buffett famously advised, ‘Be fearful when others are greedy and greedy when others are fearful.’

That’s why I was shopping in the depths of the Great Recession and why I’m currently putting together a shopping list.

The bottom line? I wish I knew how to protect you, and myself, from bad market corrections like this one. Alas, I cannot. But I can give you the following time-tested advice:

• Buy when things look like they can’t get any worse. (Not now. Things can only get worse from here and, in my opinion, they could be worse.)
• Unless you have to, never sell when a bear market is leading the news.
• If you end up selling during a downturn because you can’t handle the downturn emotionally or financially, that’s proof that you had too much money in the stock market. Learn from that mistake and don’t repeat it. (Here’s my advice on how much you should have in stock.)
• Pay attention to the news, but not too much. Be interested, but not obsessive.
• Both rejection and adoption take longer than you think. Patience pays off.
• Listen to the experts, but not blindly. No one is always right and no one knows the future.
• Always keep some money aside. You never know when the bargain of a lifetime might present itself.

So, there you go. Sorry I don’t have a magic bullet, but if you follow this advice, you are almost guaranteed to become a successful investor. It has been working for me for many years.

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