Investors who panic and sell-off in a bear market fall into two groups:
- The group who sits out until the market recovers.
- The group that runs to speculative investments.
The second group is like the gambler in Vegas who digs themselves in a big hole early then tries to win it all back in a hurry. Instead of playing the higher odd games like Black Jack and Craps, they’ll play the more speculative slots and the Wheel of Fortune with the biggest potential payouts but also the lowest odds for winning.
The investor who panics in a bear market and who sells at the bottom at fire-sale prices has a big hole to dig out of.
During the last Great Recession, investors who sold at the bottom of the market lost more than 50% of their portfolios and had huge deficits to recover from.
This time around, investors who sold at the bottom when the market lost more than 33% also have huge holes to dig out of.
The investors trying to make it all back in short order – like the Vegas gamblers – turn to highly speculative investments hoping for big payoffs.
Instead of turning to investments with the intrinsic value, they turn to investments that are no better than gambling – investments with no underlying value that rely solely on a bigger sucker down the line willing to pay more than the first sucker to make a profit.
These highly speculative investments can include:
- Penny Stocks
- IPOs (by companies with no history of profitability)
- Sports Memorabilia
- Commodities Futures
- Binary Options
In a bear market, don’t make the same mistake as desperate investors who run to speculative investments.
INSTEAD OF RUNNING TO SPECULATIVES RESET, REEVALUATE AND REALLOCATE
Whether you’ve dug yourself into a hole or not, a bear market is a time for all investors who have put their eggs in Wall Street to reset, reevaluate and reallocate.
ARE YOU TIRED OF THIS WALL STREET VOLATILITY?
IS WALL STREET FULFILLING YOUR FINANCIAL OBJECTIVES?
If you are tired of Wall Street and it’s failing to live up to its end of the bargain then it’s time to reset your investment objectives. It’s time to look outside Wall Street.
REEVALUATE YOUR INVESTMENT GOALS.
What are my investment goals? What is preventing me from achieving those goals? What will advance me towards those goals?
Many investors are in tight financial spots this recession. Many have lost their jobs to the COVID-19 induced financial crisis with no additional income streams to fall back on. Besides their home, they have no assets to fall back on.
For many, reevaluating their investment objectives inevitably lead them to seek investments that will provide recession-proof income streams backed by hard assets that they can always fall back on.
What type of investments will help me achieve my investment goals of generating additional streams of income while being backed by a tangible asset?
The answer to that question can be found in the investing habits of the ultra-wealthy who have no reason to panic.
What should be encouraging to many investors faced with difficult decisions now is that the savvy investors calmly riding out this storm were all likely in the same shoes as you at one time – most likely the last Great Recession. They are now prospering because they learned to reset, reevaluate, and reallocate.
The ultra-wealthy prefer investing in assets with sound underlying fundamentals.
These are not found on Wall Street but rather the private markets. They seek out private investments that produce income – including equity with periodic profit distributions and fixed-income debt.
For the ultra-wealthy, there’s never a single good time to invest in private income-producing assets insulated from Wall Street.
Investments like private lending, cash flowing startup funding, productive businesses, commercial real estate, agriculture, energy, etc. provide diversified income streams – even in a time of crisis.
IN THIS BEAR MARKET, DON’T RUN TO SPECULATIVES.
RUN TO RECESSION-PROOF ASSETS.