How to Deal With a Stock Market Drop
When there’s a stock market drop, what do Rule #1 investors do?
Stock market trends create fluctuations. The market goes from an emotional status of exuberance and excitement with an overheated market environment, to the exact opposite. The opposite emotion is fear, everything is horrible, everybody’s unemployed, and the sun is never going to come up tomorrow. That’s a stock market crash.
What should you do during a market drop? Here are the basic things you should be doing?
1) Be Patient in Cash
You can’t do the kind of investing I do and that I want you to learn how to do, unless you’re okay with sitting in cash. You need to be able to be patient.
Sitting in cash means keeping money in your money market account, or in short term bonds. Something where you can get your hands on it if you need to.
You have to be willing to do that for a period of time while you’re waiting for these fluctuations in the stock market to come along.
This is where the average person can jump over 6-inch bars, because the market is going to give you those 6-inch jumps once every 5 or 6 or 7 years. Sometimes it happens more often.
2) Be Ready to Load Up When it Happens
Second, when it happens, you’ve learned enough about a few companies that you can load up the truck.
This means that you’ve researched and found some wonderful companies that are going to go up when the market comes back. You buy them and get a great deal on them.
3) When the Market Goes to the Other Extreme Be Ready to Get Out
Third, when the market goes to the other extreme, which is where it’s been lately, be prepared to exit and go back to cash.
You have to be ready to sit there for 3 years while it continues to go up, because you don’t have a crystal ball and you don’t know when it will drop. All you know is that it IS going to drop.
4) Don’t Be Greedy
This is where these big rates of return come from.
Obviously, fund managers can’t do this, they can’t sit in cash for a year. These are the things we can do that they can’t do.
It starts to make you think, “Well, that means there’s going to be big chunks of time where I’m really not doing anything.”
During the time between, find the companies that you know are wonderful. Do your research. Then, when the stock market drops, you’ll be ready.
Want to know where to start?
Have a game plan in order for your Company, The market may not always be booming and on fire so