How Not To Panic During A Stock Market Correction

How Not To Panic During A Stock Market Correction

A stock market correction is an inevitability. You just don't know when it will happen exactly. Technically, a stock market correction means a decline of 10% or more from the peak. A bear market is when the stock market declines by more than 20%.

A stock market correction occured in 2020, 2022, and again in 2023. From July 31, 2023 until October 29, 2023, the stock market corrected by 10%. Sucks!

It's exactly during the good times where we need to be more disciplined in our finances, because we never know when the bad times will return. We went through bad times in March 2020. Now it's the YOLO recovery!

If you're American living in America, look at the bright side of things: the US dollar is strengthening, and the 10-year yield is back up to ~1.7%. Therefore, investors can now earn more income. Further, retirees can raise their safe withdrawal rate.

The USD will always be a global safe haven currency, no matter how hard we try and mess things up. It's good to see that we aren't the only basket cases as investors sell the Euro faster than they can say tapas!  What's going on now is that money is shifting towards US assets, namely the property market.

Combine an asset shift with cheap debt, and rental yields above the current risk-free rate of return (3.1%), you realize why smart money is moving into the US property market again. Only a minority will agree with the attractiveness of the US property market, and therein lies the opportunity.

During bad times, it's always good to re-evaluate your finances. I'm not convinced the bad times are back and am actually quite sanguine about the economy with the unemployment level at a tight ~5.3%. All the same, here are some suggestions just in case things get ugly for longer.

Things To Do During A Stock Market Correction

1) Know where your money is.

It's important to have an idea of where every single dollar of your wealth is allocated. In a bull market, perhaps suddenly you find yourself with 50% of your net worth in the stock market vs. a 35% comfortable allocation. The best way to get a snapshot of your assets is to list everything out in an excel spreadsheet manually. Re-evaluate, re-balance, re-consider. Check out my proper asset allocation of stocks and bonds by age post.

2) Consider being contrarian and don't confuse brains with a bull market.

Was there a reason you've been holding 30% cash in the stock portion of your portfolio? Perhaps the reason was exactly for times like this?  It's generally never good to panic in either direction. If you read my post published in March 2020 entitled, How To Predict A Stock Market Bottom Like Nostradamus, you will notice my contrarian view.

3) Get in earlier and leave later.

In other words, work harder at your job and show that you are an indispensable team player. I can promise you that every manager thinks about cost cutting as soon as we have 10% downward movements in the markets.

The manager's goal is run a profitable business units and layoffs are always on the back of their minds. Your manager thinks about a future of “what ifs”, and so should you. Buckle down, be outstanding. You can't control the markets, but you can control how great you are.

4) Prepare for the worst, but keep faith things will be OK.

Preparing for the worst means ratcheting down your expenses and getting rid of inventory.  Inventory can include your mountain of books, clothes and your 3rd TV with accompanying 3rd cable box. Expenses can be that $200/month gym membership you never go to or else you'd be thin.

Preparing for a recession also means looking for a new job and developing side incomes just in case your main source gets expunged. If the worst comes, you're ready, and if things are just business as usual, you're pumped! When you prepare for the worst, there's only upside!

5) Look around and realize today is just like yesterday, which will be just like tomorrow.

If you didn't have a media stream telling you the world is ending, you'd never let financial losses affect your well-being. A stock market correction always feels worse than it really is.

Your happiness is all in your mind. You have the power to choose to be happy. It doesn't cost much to touch base with family and friends or go for a walk in the park. Too often, we close inwards and worry about how we're going to retire comfortably during market turmoil. Things come back after a stock market correction. They always do.

Remember to focus on things you can control and let go of things that wiggle and squirm.  If you choose to let fear enter your mind, you might as well use it to fuel new creation. Downturns are exactly the time to start something or do something better. Cherish meltdowns and embrace the challenge!

Related: How To Make Lots Of Money During The Next Stock Market Correction

A Stock Market Correction Will Come

Don't be afraid of a stock market correction. When it comes, take advantage! With proper cash management, you should always have enough fire power to buy stocks at lower levels.

A stock market correction is one of the best opportunities to get rich. Hold your stocks long enough and generally good things will happen.

Related: The Recommend Split Between Active And Passive Investing

Invest In Private Growth Companies

Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Track Your Net Worth Easily For Free

In order to optimize your finances, you've first got to track your finances. I recommend signing up for Personal Capital's free financial tools so you can track your net worth, analyze your investment portfolios for excessive fees, and run your financials through their amazing Retirement Planning Calculator.

Those who come up with a financial plan build much greater wealth over the longer term than those who don't!

Retirement Planner Personal Capital - How Not To Panic During A Stock Market Correction
Personal Capital's award-winning retirement planning calculator. Are you on track?

64 thoughts on “How Not To Panic During A Stock Market Correction”

  1. @savvysavingbytes

    Hey Sam,

    That’s funny about everyone claiming to beat the markets. And I think you’re probably right. I get the biggest kick out of those laying claim to beating it over the past year or two. Of course, even if you had just a 5% bond allocation during that time, you would have beaten the market, in all likelihood.

    I think the markets are going to eventually beat me silly. And when they catch me, I’m going 100% indexes. So far though, so good. That said, I have no long term dellusions. I’ll very likely get caught.

    .-= Andrew Hallam´s last blog ..Mariusz Skonieczny — Why Are We So Clueless About the Stockmarket? =-.

  2. Ha. I’ve given up on the market years ago. I’ve researched a method that has guaranteed returns and allows me to by pass banks to finance my purchases. It saved me tons and kept me out of the latest stock market crash. This method is still not widely known so hopefully the Gov’t won’t decide to take it over. Good luck with those riding the stock market roller coaster.

  3. savvysavingbytes

    The big stock market dive a few years back has definitely made me more cautious and careful. Last year the market did quite well for me, but since it just hasn’t felt right for months, I obeyed my gut instinct and got out for awhile. I think this is a needed correction here and after some further volatility, the direction will continue up.

    I like your quote, “You have the power to choose to be happy.” It’s a nice reminder that we’re all captains of our own ships.
    .-= savvysavingbytes´s last blog ..Free Summer Entertainment in New York. Enjoy! =-.

  4. Sam,

    Some of your readers might find comfort in this:

    The more things change, the more they stay the same…

    Investors are fleeing to gold bullion as they lose faith in the stock markets and in the U.S. currency. Gold is up 440% in just one year

    The U.S. stock market crashes nearly 50% from the previous year’s high point

    The price of oil quadruples in a single year

    New York City teeters on the brink of bankruptcy!

    The U.S. dollar plunges in value, and even the Canadian dollar eclipses it as the U.S. reels from the debt of a foreign war it could never win

    The American people lose faith in their President and he’s impeached for impropriety over a scandal

    An adversarial nation as powerful as the U.S. have nuclear weapons targeting all major American cities

    The year? It was 1974.

    Think about those above issues for a moment. Would you see more pessimism in that era or in our own?

    Greece’s debt might freak you out and Goldman Sachs could terrify you.

    But are things really worse today than they were in 1974? Ten Goldman Sach’s couldn’t do the damage of one nuclear bomb on New York City.

    There’s a saying that Ben Graham, Buffett’s former professor at Columbia University enjoyed waxing: Plus ça change, plus c’est la même chose

    It means, the more things change, the more they stay the same.

    And here’s another wise “Grahamism”: You pay a high price in the stock market for a rosy consensus. Uncertainty and fear will give us great stock prices, hopefully for years to come.

    What about retirees? If they’re responsibly allocated, they won’t have a high exposure to the stock market. Nobody in their golden years should, unless they’re keeping equity investments to bequeath to the next generation.

    Are things worse today than they were in 1974?

    What do you think?
    .-= Andrew Hallam´s last blog ..29-05-10 – Harry Exploits Scared Investors =-.

    1. I have no idea about 1974, b/c I wasn’t intellectually conscience then. I see your point, and I do take comfort in the fact that downturns and rebounds have occurred before.

      I’d have to believe 2008-2010 was much worse than any other 2 year time period in our lifetimes for the markets. Yet, we all survived and are doing just fine. Hence, I’m not worried.
      .-= admin´s last blog ..An Extra Seven Hours A Week =-.

  5. The realist has to admit that the market could swing a few thousand points in either direction–we’re in one of those bizarre times when either outcome is more than a possibility.

    There are times in history that have been very calm, but this doesn’t seem to be one of them. It’s certainly nothing like the 1990s which might have been the true golden decade for stocks.

    But I have to dovetail onto what Kim | Money and Risk said above, this is probably a time for some caution. As she mentioned, employment and real estate are still weak, but the beloved low interest rates are what may be most troubling.

    The reasons they’re as low as they are aren’t good–basically they’re so low because of a still very weak economy–that can’t be ignored. And as low as rates are, they probably have no where to go but up. When they do, that’ll have an affect on stocks.

    Sam, your loose suggestion of 35 or 50% in stocks is probably a good range for most people. Invest too low and you can miss out on a bull run, too high and you could get clobbered.
    .-= Kevin@OutOfYourRut´s last blog ..Where Do YOU Think the Stock Market is Headed? =-.

    1. Kim | Money and Risk


      I’m very concerned about interest rate. Inflation is bound to come because of the sheer amount of money that was dumped into the economy and they have to take it out. Right now, the govt is controlling the interest rate but there are some that they are already having trouble controlling like LIBOR. That’s the interbank rate and it’s projected to triple by the end of the year.

      I just don’t know when inflation will come but worry about the effect on normal people when it does. No one seems to remember when Prime rate was at 21%. Think about what it does to employment when a business has to borrow money at 24%. I rather be a Cassandra and say, let’s plan for that and protect you right now with every thing that can be affected by inflation now like fix your mortgage rate, cut your debt, build a savings moat, etc… The worst that can happen is no inflation, but you have the best mortgage rate in decades.
      .-= Kim | Money and Risk´s last blog ..Tell the World How You Define Success =-.

      1. Hi Kim – You would think that with all the gov’t pump priming and monetary expansion inflation would come. But it’s just not the case due to such a huge output gap in the economy. When the housing boom returns and stocks are on fire, we’ll see some inflation. Before that, nope.

        If you have a floating mortgage right now indexed to LIBOR at 0.6% or whatever it is, you are LOVING it with a 3% mortgage rate! Anybody who took out a fixed rate mortgage 10 years ago was dead wrong, have to admit it! Myself, included.

        I’m a buyer of US property right now. I can’t get enough.
        .-= admin´s last blog ..The List of Jobs I’d Do For Free Baby! =-.

      1. As for all the talk about “good news” relating to rising markets and “bad news” being a falling market, I’m a bit surprised at the speculative nature of the crowd.

        If you’re young, a plummeting market or a stagnating one is exactly what you want. There’s nothing “contrarian” about that, either. If you’re young and you want to make money, you’d better be starting off in 1965 (accumulating assets) rather than starting off in 1990 (accumulating assets)

        Here’s my rationale: From 1965 until 1982 the markets didn’t move. During that 17 year stretch, there were ups and downs, but when you include dividend payouts the investor barely kept pace with inflation. That said, anyone investing money regularly during those 17 years eventually made a killing when the markets took off. A 20 year investment stretch from 1965 to 1985 would have been better (despite limited market movement) than a 20 year investment stockpiling from 1982 to 2002. In the latter example, the investor felt really good about what he or she was doing, because the markets were on the rise, but they couldn’t reap the rewards of a significantly expaning portfolio after the year 2000–especially because the markets had hit silly levels (PEs of 28 and above) that don’t ever bode well for the following decade. Sadly, their retirement portfolio wouldn’t really have grown. I have read most of your profiles, and most of you are young. For that reason, I don’t think you guys think correctly about market prices, levels and volatility.

        Hoping for higher prices (when you’re a regular buyer of oranges) makes no sense. Eventually, 200 years of history suggests that orange prices will rise considerably over time–so if they didn’t mold (OK, leap of faith with my metaphor here) wouldn’t you want to stockpile your oranges when the price is stagnant or falling?

        Sam, I think you were getting emotional when you put out a one year challenge to Investor Junkie. Even a 5 year investment track record is laughably short. It’s better than one year, but someone claiming to beat the market 5 years in a row is probably more lucky than skilfull. I have beaten the market for a decade—and I’ll be the first to tell you that a hell of a lot more luck went into that than skill.

        As a young accumulator of stock market assets, I get a tad depressed when the markets rise. I want to see it drop–and drop far. I love picking up great stocks at cheap prices, and if you want to make a long term killing in the market (and you’re young) then that’s the philosophy you need to adopt.

        I can’t predict where the market is going to go. But during my asset building years, I want the markets going nowhere.

        .-= Andrew Hallam´s last blog ..29-05-10 – Harry Exploits Scared Investors =-.

        1. Andrew, I will let you in on a secret. EVERYBODY online outperforms the stock markets .

          If you look around the PF web, or otherwise, nobody has lost money in the downturn, and everybody is very well off.

          This is why I have such a positive bias on everything. If everybody is doing great, even in the worst of times, then during the great times, watch out!
          .-= admin´s last blog ..The List of Jobs I’d Do For Free Baby! =-.

  6. In my humble opinion the good times weren’t back a month ago, and the bad times aren’t back now. We’re just middling along as we try to work out if we’re out of the potential Japan scenario post-credit crash (I think we are, but US M3 money supply is worryingly tight) and bumping up and down on fear and greed.

    The good news is valuations still look good for equities, especially after the slump.

    If I was a US investor I’d spend some US $$$ buying the UK stock market, which is on a P/E of about 10 and yielding 3.8%. It should pay a nice income, and if/when the pound goes higher again against the dollar (it’s been nearer $2:£1 for much of my adult life) your income will get a further boost.

    Do your own research though, that’s just what I’d do. :)
    .-= Monevator´s last blog ..Invest in antique furniture =-.

    1. Thanks for your thoughts. What do you say to people who say, “Of course you are bullish on the UK, you’re English!” It may not be a bad idea given the decline in the Euro. That said, when you can buy property that gives you a 2%+ spread over the risk free rate of return wrt to rental income after prices came down, I think that’s a worth trade.

      The good times are back. I’m just afraid not so much with the Euro Zone yet.

  7. yeah, the way the markets have been acting in the last week have really shaken things up again. It was a good wake up call that we can never get too confident with our money in the markets. I’m glad I don’t have too much invested, but my 401k is definitely exposed. Hopefully the next time we get back to 11,000 we’ll stay above it!

  8. myfinancialobjectives

    Wow youngandthrifty, good thing you had planned ahead!

    When the market hits turmoil, I look to buy. In the long run this whole year will probably look like an excellent time to buy. I’m not really in it for short term gains, so and significant loss only looks like opportunity to me.
    .-= myfinancialobjectives´s last blog ..XML Sitemap Upgrade, RSS Corrected, Permalinks Fixed, Link Rally! =-.

  9. Kim | Money and Risk

    Sam #5 is a great piece of advice.

    Money does not define who you are. If you can keep that focus, your financial decisions will be less emotional and actually more profitable. No one can and will ever be able to control the stock market because of unexpected events. However, things go in cycle (it just may not seem like it because the cycle is sometimes in decades.)

    Ctreit makes a good point about making decision for long term and about the dollar. Each investor has to determine their risk comfort zone and manage to that zone. I rarely talk about the market except with my clients but occasionally I succumb because it seems like no one is touching base with their own research.

    In April, I was hoping that people look at underlying data beyond the basic news and reallocate. Unfortunately, I think a lot of people didn’t. Those numbers about unemployment and RE are still a concern today.

    Investors still need to form their own opinions about investing and stop listening blindly to any one source such as Kramer. The latest stats indicated that 80% of the US makes financial decisions based on what Mad Money and Suzie Orman tells them to do. This is a recipe for disaster. The problem is that by the time people ask for help, the damage is irreversible.

    The main takeaway is that there is always opportunity whether in the market or in real life via business during times like these. Mitigate the risks you have and focus on how to take advantage of the opportunities.
    .-= Kim | Money and Risk´s last blog ..5 Good Habits for a DIY Investor Using the Internet =-.

      1. Kim | Money and Risk

        Those stats were from polls that financial companies were doing with their
        clients. Suzie does a lot of damage to people that few people realize.
        What happens is that she says do this and people go out and do it
        without checking. For example, right now, she’s telling everyone to
        convert their IRA to a Roth. She doesn’t mentioned the fact that you have
        to pay taxes. I’ve had to deal with a few like that. When the only money
        you have to pay tax is from your IRA, it changes the entire situation.

        There were other issues that came about last year as well caused
        by people running out and moving their IRA.
        .-= Kim | Money and Risk´s last blog ..Change the World by Redefining Success =-.

      2. I actually think Suze in some ways is worse than Cramer. Cramer at least in reality
        invests in the market, you can’t say that about Suze.

        Great are both to watch to get stupid little sound bites. Investing, like life, isn’t like this.
        .-= Investor Junkie´s last blog ..Economic Forecast for 2010 and 2011 =-.

        1. Kim | Money and Risk

          Gosh Sam,

          Roth conversion is a pretty detailed topic and I have really strong opinions about it. In case you haven’t figured it out by now, I’m pretty frank about things so feel free to pull a rein on me.

          I actually have 4 articles on Roth that I’ve been working on to post. I have to split it like that because there are so many things for people to consider, both while they’re alie and needing money as well as after they’re dead and it goes to their kids. I keep getting distracted by other topics. I’ll try and finish them to post this weekend since the movers are shifting my office around again.

          I definitely will pop on and read your Roth article. I missed it somehow.

          I think the Roth conversion is a wonderful gift for the RIGHT people with the RIGHT reason, need and goals. It’s not for everyone.

          I know what some of the large firms that people trust so much are doing with the Roth and I can only cringe over the fallout that people are going to suffer. The problem is that they’re not doing anything wrong. People have to take responsibility for watching over their own investment and doing their basic research.
          .-= Kim | Money and Risk´s last blog ..Tell the World How You Define Success =-.

  10. Nunzio Bruno

    You’re Top 5 was on point! I was especially fan of keeping the faith. In good times and in bad the average investor always seems to be fixated on where they think the marke will end up..and it’s usually not a pretty sight. When you break out the numbers and the 10 year rolling periods those that are getting in earlier and leaving later are doing the best. It’s all about those ebbs and flows :) If I was having a conversation with someone wanting to get into the market today I would’ve covered everything you did in this article. Great post!!
    .-= Nunzio Bruno´s last blog ..2.5 Top Overlooked Costs: Starting A Business =-.

    1. Thanks Nunzio… I think point #5 is very important too. Seriously, if we shut off all media and electronics, we’d be as happy as we ever were. It’s so mental. Just asset allocate and keep things consistent! No need to panic, cuz the bull market is back after today’s (Thurs, May 27th) huge rally! lol. Thanks for stopping by.
      .-= admin´s last blog ..Pretend You Have Arrived So You Can Become =-.

  11. Great post and discussion. Market is in midst of tremendous tug of war with very positive global economic growth data. As it occurs people are changing their spending/saving habits for the good. On the negative side is Europe. Those who know history know the impact of a devastated Europe in the late 1920s and into the 1930s. Yesterday’s statement that China is holding in is good news on this front.
    Great environment for traders.
    .-= DIY Investor´s last blog ..Jodi Beggs gives advice on how to become a behavioral economics nerd =-.

  12. Credit Card Chaser

    Noooo! Don’t tell me I have to give up my stacks and stacks of books or cut out my guilty pleasure of buying tons of books at Amazon!!! ;) lol
    .-= Credit Card Chaser´s last blog ..Citi Driver’s Edge Options MasterCard =-.

  13. Roshawn @ Watson Inc

    Oh yes the markets have been so tumultuous lately. These corrections are certainly not unexpected. Earlier this month, I was purchasing and had to completely reconsider purchasing my favorite funds because they were trading near 52-week highs. It was just hard to pull the trigger with that information, and I am glad that I didn’t. My strategy doesn’t really change too much during a down market: I look for assets that are on sale to fill my portfolio. I love your points. The only one that I would probably add is “do not kid thyself.” I once heard a billionaire say this at a conference, and he is so right.

    Friendly Regards.
    .-= Roshawn @ Watson Inc´s last blog ..Yakezie Round Up and Uncommon Money News (Vol. 95) =-.

      1. Roshawn @ Watson Inc

        Sure that can be an example. This point is really about being honest with yourself in general. If you are fearful of the market, don’t deny that you are fearful, deal with it. Perhaps you have a good reason to be scared. If you find investing difficult (i.e. if you don’t know what you are doing), don’t just spew out recycled jargon and mantras that you don’t really understand in an attempt to sound smart. If you have a weak financial foundation, don’t invest just because others tell you to. Consider waiting until it is a good time for you to invest. The point is, don’t fall for your own bull. Be willing to learn. Know your strengths and limitations with regards to investing (and beyond).
        .-= Roshawn @ Watson Inc´s last blog ..Savings Down, Spending Up but What Does it Mean? =-.

        1. Roshawn @ Watson Inc

          I have absolutely no problem with those who believe their own bull personally; I just think doing so will hurt most people financially. If you are wrong, you are often making someone else richer with your mistakes. If you are right, then more power to you. You played a superior game, and I tip my hat to you. For example, I’ve been impressed with John Paulson for the last 2 years. He made a brilliant play, and the sophisticated investors who thought they knew where the market got embarrassed by betting against him. Yes, I know a ton of people don’t like the fact that he personally made BILLIONS betting against the economy (and structured a deal that disguised his opposing interests). It doesn’t bother me one bit. The people who bet against him were qualified by the SEC, meaning they should have known valuation methods and have been able to spot this rat. They failed because the believed their own bull (real estate & the market will always go up, we can spin these bad debts off as derivatives, etc). Alas this is the game of wall street: fear and greed. Thus, bullheaded people are expected. The real test to your accumen is not what you say but what you do (i.e. what’s your long-term ROI compared to the market in general).
          .-= Roshawn @ Watson Inc´s last blog ..Savings Down, Spending Up but What Does it Mean? =-.

  14. The stock market is always a roller coaster ride to begin with, but I don’t think it’s headed back into the toilet. It’s going to go through some corrections, so highs and lows are to be expected. But when it dips, it’s a good time to buy! It’s also the reason why you should have a diversified portfolio.

    I really feel badly for the folks who are on the brink of retirement, like my father — the past year or two has really messed with his retirement plans and made him a bit nervous. But he doesn’t have all of his eggs in one basket, at least.
    .-= Rainy-Day Saver´s last blog ..Capital One’s ‘Phantom’ Interest Rate Increase =-.

    1. That is tough Nicole for those on the brink of retirement. Hopefully, most folks who are older have employed more conservative investments? I like the age rule, where your age = the percentage allocation in fixed income or cash.

      Guess we will all learn from this downturn, and not confuse our genius with a bull market!
      .-= admin´s last blog ..Pretend You Have Arrived So You Can Become =-.

  15. Recession is the best place for someone trying to get ahead in my opinion. “And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”

    If you can keep emotions at bay, continue with dollar cost averaging (continually investing at a regular basis) and push along as you would when you hear nothing from the market, you will come out in a better situation than how you went in, and better than those that freak, pull out and hope to time their re-entrance into the market.

    Job loss has different answers and is harder to cope with than a drop in 401k balance, but like you said, “Look around and realize today is just like yesterday, which will be just like tomorrow”

    It’s just another day, just like the Dow hitting 10,000k didn’t change a thing
    .-= Jesse´s last blog ..Guest Post: Don’t Devalue Yourself =-.

        1. One day increase makes a bull market? I assume you are joking. Volatility is the norm and
          will be around for quite awhile.
          .-= Investor Junkie´s last blog ..Economic Forecast for 2010 and 2011 =-.

        2. I never stated it’s a bear market either.. Though if I’m stating it’s going to be only slightly
          higher than call me a bear then ;-)

          3% GDP is growth abit at a slower than usual pace. I’m just not believing in the ‘V’ shaped
          recovery. I’m more for the square root (with the tail slightly up) result.

          You know as well as I do you can have bear market rallies as some have stated this is.
          .-= Investor Junkie´s last blog ..Economic Forecast for 2010 and 2011 =-.

  16. Great post, Sam! The market has had such a tremendous rally since March last year. It has to take a breather at some point. Unfortunately they are still not ringing the bell when the markets are about to decline, but maybe your posts and Newsweek’s covers will serve as bells in the future.

    Sound financial planning should not really be impacted by short-term moves in the stock market, not even if these moves are rather large. You list five of such sensible steps which will endure the test of time.

    On one thing I have to disagree. I don’t think that the “USD will always be a global safe haven currency.” I don’t like absolute statements like this. I’d rather say that for the foreseeable future the USD will be the global safe haven currency. Things may be the same tomorrow, but who knows what happens the day after tomorrow? The British Pound, gold, and silver used to play the role the USD plays now. A while ago people could not believe that the UK would become just another country, or that the USSR would lose its status of super-power, or that Britney Spears would have more followers on Twitter than Ashton Kutchner did. Things change all the time and sometimes in unexpected ways.

  17. Money Reasons

    Great point, hard to say with respect to a double dip.

    Before the Greece debt hit the fan, I was sure we wouldn’t have a double dip… But after the Greece exposure, I’m not so sure. I really don’t know how Greece can cause such a panic (I don’t think our banks have much exposure there), but with a global economy, who know…

    As for the sudden fall in the market, I have to wonder if the “Uptick Rule” is back in place, and if it isn’t, would we still have the sudden drop? I heard that the “Uptick Rule” doesn’t matter, but I think it would still slow things down during steep falls.

    As for adjusting, mostly I’m just going to wait this one out. Unlike my friends, I’m not as sensitive to the market swings anymore.
    .-= Money Reasons´s last blog ..Lemons to Lemonade – Lessons Learned From A Broken Lawnmower =-.

  18. Frankly, nobody knows where the markets are going in the short-run, but in the long run, the bias is generally up.

    This is not so, Sam. I have a calculator at my web site (“The Stock-Return Predictor”) that performs a regression analysis on the historical stock-return data to reveal to investors the most likely long-term return starting from any of the various valuation levels. In 2000, the most likely long-term return was a negative number.

    Stocks were then priced at three times fair value. You cannot expect to obtain a good long-term value proposition from something for which you pay three times what it is worth. We are now down to two times fair value. So the likely long-term return is now a positive number. But it is still only 2 percent. Given what you are going to have to live through to get that 2 percent from stocks, I think it would be fair to say that it is an extremely rare investor who should be going with a stock allocation of more than 30 percent today.

    You’ve heard that it’s a bad idea to use credit cards to cover all your spending, right? That’s what we were doing when we pretended that the money “earned” in the 1990s bull market was real. Those returns were borrowed from tomorrow’s investors. Which are now today’s investor’s — us!

    If The Stock-Selling Industry had let us know that we were going to have to pay back the debt, I think it is fair to say that we would have elected to incur a whole big bunch less debt. But then the people trying to sell you junk don’t always fill you in on the 100 percent straight story, do they?

    We could use internet blogs to fill each other in, as we do in the saving area. I believe that’s the future.

    .-= Rob Bennett´s last blog ..“A Social Taboo Blocks Posting About the Realities and the Market Becomes Dysfunctional” =-.

      1. Or, at the very least, start a joint website and charge people people for your insights! I’d happily pay thousands if I can make millions!

        This sounds like a juicy opportunity, Sam. It’s far too juicy for Junkie and I
        to even give a thought to the idea of leaving you out. Junkie and I want you in
        the group! This is John talking to Ringo. Do not let this one pass you by!

        I’m obviously just joking around. Thanks for getting the discussion going, Sam.

        .-= Rob Bennett´s last blog ..“A Social Taboo Blocks Posting About the Realities and the Market Becomes Dysfunctional” =-.

  19. their is no doubt that the market is all over the place as of the last year or so. One day it is up 300 points the next it is down 200. the most important thing is to make sure your money is at least doing something, even if its only increasing at 3% that’s at least better than inflation which is currently 2.44%

  20. Who would have known about Greece’s default, and how much it would spook the markets? It’s pretty unbelievable the movements.

    Don’t worry about Investor Junkie. I’m sure he didn’t do anything to make money in this correction and is just trying to rile you up. And look, he’s a guy who is trying to join the Yakezie 5 months after it started with 1 month left or so to go in the challenge! If that’s not Johnny come lately, I don’t know what is. It’s probably because he got whiff that he could make a little money.

    I read your original post, and understand the latent facetiousness in the tone when you said the good times are back again. I understand you’re poking fun of the markets again with the title of this one. Don’t worry, there are some who do understand your meaning!

    1. I actually joined based upon an email from Sam FYI and also see my follow up post if/when Sam approves it. My post was NOT meant to dis Sam in anyway and just stating an observation. If you or he take offense by it, then so be it.
      .-= Investor Junkie´s last blog ..I’ve Joined the Yakezie Challenge! =-.

      1. It’s not offensive, your comment is just annoying b/c it’s glib and a self-proclamation you are so wise, without anything to show you are so.

        So let’s do this, I challenge you to put money where your mouth is and write about all your investments and asset allocation decisions from now til end of the year. Or at least make a couple predictions, b/c it’s too easy telling others they are right in retrospect. You were the most vocal about the weakness of the US dollar last, and I told you it didn’t matter b/c I knew it would come back. And come back with a vengeance indeed, and money in the bank.
        .-= admin´s last blog ..Pretend You Have Arrived So You Can Become =-.

        1. Where do I say I’m wise? I stated you are a contrarian indicator, nothing about
          my investing expertise.

          As Yogi Berra once said, “it ain’t over till it’s over”. I never gave a time frame
          about the dollar decrease, but if you want it I’ll state in within 10 years.

          The perfect analogy regarding the dollar was stated by Barry Ritholtz:

          “The U.S. is the best looking horse…at the glue factory.”

          With any opinion (which my statement is and only is) I should be able to change
          it in the future. This is because the market/ecomony/political decisions don’t
          stay constant. If they did, you could set and forget your investments.

          I don’t tend to make specific investment predictions unless I’m very familiar with a
          stock. I do tend to think in long term trends (5-10 year) and at the macro-econ level.

          So if you want me to discuss these on my blog, I would be happy to create a post
          for this.
          .-= Investor Junkie´s last blog ..I’ve Joined the Yakezie Challenge! =-.

    1. Of course you did, because you are a genius investor like everyone is on the internet! Tell me, how much did you make shorting the market? Easy to lay blame in retrospect right? So tell us Oracle, where do we go from here?

      Did you read this post or just the headline? It’s a positively predisposed post that pokes light at the volatility of the market and all the panic.

      And finally, did you understand the message of the other post which is to : 1) save money and be more diligent with your finances when things seem to be back, and 2) come out with a list of indulgent things and cross them all off with things you can do without or replace much cheaply?

      Unbelievable you think that one post means I’m a contrarian indicator.

      1. I rarely short stocks, nor saying I have all the answers. I did change some
        asset allocation because of this (not because of you specifically).

        Just everyone stating the economy was on a tear and could do no wrong
        (not just from you) is a sure sign of things are not “Ok”. The group think mentality
        and throws rational thinking out the window.

        Yea I get the purpose of the message of the post. IMHO these are things you should
        always do, not just because the stock market took a 10%+ nosedive. The time to
        prepare for a fire in your house is NOT when it’s currently on fire. If it wasn’t
        learned in 2008/2009, then that should be the lesson learned this past month.

        I look at investing and business as a chess game, planning multi-steps before I
        make my initial move. Can I predict the future? No. Can I plan for possible
        outcomes and the likely hood of them? For most yes (cept for black swans).

        What you are talking overall about is risk management.
        .-= Investor Junkie´s last blog ..I’ve Joined the Yakezie Challenge! =-.

        1. While I agree the econ is improving, we have a long, long, long way to go.

          Ok since you wanted them here are some predictions:
          – The US Bond market is the ultimate bubble. Rates can only go higher, not
          sure when but will not be a Japan.
          – Unemployment will remain higher structurally higher, a few years because of: deliveraging, tax increases and govt intrusion
          and uncertainly they are causing. We will not see under 7-8% unemployment during this time.
          – GDP will remain subdued for the next 2 years at under 3%
          – Some markets are seeing artifical inflation/growth because of government support and money has
          to flow somewhere by 0% Fed rate. Hence why you are seeing some
          disconnect with the stock market with other factors. While it should be higher
          than the March 09 lows, it ran up too much/too fast.
          – Market for the most part will be sideways (slightly higher) for the next year
          – Expect increased volatility to be the norm for at least the next year
          – FED does not raise rates at least until after the election and expected towards
          mid 2011
          – Double dip technical recession while not 100% ruled out it is unlikely.
          – After the Nov 2010 election we will see a pop in the stock market

          It is my opinion we’ll see really crappy growth in most of the economy.
          .-= Investor Junkie´s last blog ..I’ve Joined the Yakezie Challenge! =-.

        2. I actually do believe the US economy is on the upward mend and things are getting much much better. Greece is an uncontrollable exogenous variable that is now unfortunately affecting us in the US.

          So you read my original post on the good times are back again, and you’re giving a house analogy regarding a fire is in the house. Is that not the exact point of my “good times are back again” post? Maybe I need to write shorter and more clearly, and not do too much ‘leveling” as it might confuse people.
          .-= admin´s last blog ..Pretend You Have Arrived So You Can Become =-.

  21. I’m so glad I don’t watch TV! I don’t often feel like “it’s the end” because I don’t listen to the media constantly exaggerating how bad (or good) things are. That’s not to say I’m ignorant of what’s going on, I do read the news. But reading it myself means deciding what parts are most important, and I can choose my tone of voice ;). I’m sure in a few months the media will be telling the public to go out and spend their money because things are so great.
    .-= Little House´s last blog ..Monthly Update for May =-.

Leave a Comment

Your email address will not be published. Required fields are marked *