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It's interesting how quickly market sentiment can turn. We've gone from hot to cold seemingly overnight. My stock portfolio has dropped in value and I'm sure yours has too. Currently, there's lots of pessimism in stock markets around the world – Canada, U.S., Europe, India, China, and pretty much everywhere else. We're in the midst of a correction with ~10%+ declines from highs among the S&P 500, DJIA, TSX Composite, and other indexes. My Facebook Group, YouTube Channel, and other platforms' activity has gone down. All I can hear are crickets.
Some say that this is the start of a long bear market, and that declines will continue from here, "so you should sell all of your stocks". Rising rates, punishing trade wars, and ballooning debt loads are among the worries. Plus we're around 10 years into what many so-called experts call a "prolonged bull market". The worries are warranted, and should not be completely discounted. It can be scary. My Mom even texted me last week, asking "what is going on with my investment account...it keeps going down". Don't worry, Mom. Times like these excite me; let me explain...
I've never regretted pumping more money into stocks when the broad market was in decline, and sentiment was gloomy. During the decline it's scary and feels downright stupid to invest more into my existing holdings, but in hindsight it's always been the right decision. I've never called the exact bottoms, and if I did I would be on a beach somewhere, but this is how you build wealth in the stock market; it's not a sprint, it's a marathon.
Over the past couple of days, I pored over the latest quarterly reports of my existing stock holdings, and added money to the companies that posted solid results with unchanged guidance, but still suffered a 10% - 40% drop in their stock prices. In the future, I'll know whether I made the right decision. And if the market declines further from here, I'll look to add more capital. It's impossible to time the market. That's what I've accepted; I don't know where the market is going in the short term, but I do know that that it's going up in the long term. I'm an optimist. But I'm also a realist; not all of my stock picks will be winners, and that's ok.
You might be at that point too where you don't know where the market is heading from here. You're contemplating whether or not you should add more money to your existing stocks, and wondering if there's other discounted opportunities out there. If you have picked up my new book, Capital Compounders, flip to Chapter 20: My Universe of Growth Stocks. In this chapter, you might find some ideas that you'd like to conduct more research on.
I wish you well out there. Investing can be tough, but the more years you're in the stock market, the more desensitized you become to the declines, and the more aware you are about the ability to compound wealth faster if you stay invested, buying at depressed levels. Most people understand this truth, especially the older readers. But while there's lots of smart people out there, from doctors to lawyers, not everyone can stomach the market, and most people just want to become a gazillionaire overnight. That's not going to happen.
Some dip their toe into the stock market, and quickly jump out. Others are perpetually scared and will never try to swim. That's why when someone new to investing asks me what to do in the beginning, I always tell them: "lose money early; develop thick skin". They think I'm crazy but that's the best lesson that I cannot teach them. After one loses money, and then later develops their own investment strategy, including what stocks to buy in their universe, making money in the market becomes easier, but not easy.
Plant seeds, and water the trees. Invest for the long run and you will build wealth.
Regards, and happy investing,
Past Newsletters (in case you missed any):
Robin Speziale is the National Bestselling Author of Market Masters. He lives in Toronto, Canada. Get a copy of his latest book, Capital Compounders.
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Disclaimer: Robin Speziale is not a registered advisor. This newsletter does not contain financial advice or stock recommendations. Please conduct your own research and consult a professional.