2018 was a time of joy and grief for any market participant. Stock market went up and down and ended up – unfortunately – very sad. What to do now?
Let’s start with a good news for the average stock investor. You could have done worse if you would have invested in Bitcoin. The sharp loss of more than 80% of market value must have hit many bitcoin speculators very hard. Especially the ones who bought in at the end of last year. Last December, I wrote not to do so and talked about the signs who not. Well, I know, many thought I was crazy and didn’t know what I was talking about. All year around those people tried to talk me into investing in crypto currencies. They had no understanding why I rejected. I hope they know now.
The bear shows his claws
The stock market seems to run off in January just to lose sharp in February and even sharper in March. Since July, the DJI only knew one direction: upwards. But he found his end at the beginning of October, a few points above its high at the beginning of the year. Since then, the Dow lost around 3000 points or around 11%. The S&P 500 didn’t perform better. At the contrary. So, should you start panicking?
Time to panic?
Now starts the time to separate the wheat from the chaff. Many young and new investors who only know about a bigger market decline through press and books face a new challenge. After years of rising stock prices, in which one could make money with nearly every asset, those market participants have to show, if they are as strong as they hope they would be. I have a friend who started investing with me who left the market after the dotcom bubble and never came back.
Maybe the market has just opened a single little valve and lost some air. Who knows? It’s the end of the year and all those great gurus start to forecast the direction of the market. But the truth is that we only will know it at the end of 2019. Not a minute earlier. So, what to do know?
Don’t bury your head in the sand
First of all, don’t panic. As I wrote in another article, it’s just the market that falls. It’s not the value of the company that rushes down the way the market does. So, if you are an investor falling markets are your friends. The last year wasn’t easy for value investors. Not because they didn’t get enough return. On contrary. But it was hard to find something to invest in. Many companies were and still are much overpriced. Getting an outstanding company at a bargain with low risk was difficult.
But times may become better now. That’ s why you should be happy about the market decline. Companies you may want to have in your portfolio become cheaper and more affordable. And the cheaper they are the lower the risk and the more you can buy. But don’t buy any cheap company. Be picky. Buy the best ones. Wait for the fat pitch, as Warren Buffett said. Do your research and don’t believe you could miss something. The lower the market, the more buying opportunities you will find.
I don’t know what the market will do the next year. But I hope investor’s time is coming.