In fact, statistics are indicating this may be the worst beginning for the stock market in decades and decades. Not what we wanted to hear, is it?
What to do? With all the uncertainty spiraling around our heads — an election year, economic downturn, global turmoil, national infrastructure disasters — how are we to make money in this market?
And since the Federal Reserve continues to lower interest rates to an ever-depressing 3 percent or less, we can’t even use the strategy of putting money into a short-term CD until “everything blows over.” Three percent interest will hardly keep up with the cost of living (although, keep in mind it’s always better than losing money, which definitely won’t keep up).
My advice is to treat this kind of situation as a great learning opportunity and a great test of your courage. Because I’m going to ask you to do something that might at first seem counterintuitive to what you believe you should do. I’m going to ask you to do your research, pick a few good stocks, and then, as they say in the bungee jumping business, “Close your eyes and jump!” In other words, buy. Buy now when sell-offs happen every day on Wall Street. Buy now when it’s a buyer’s market, when the stocks you drooled over last year were too expensive, so you walked away from them. Well, now they’re “on sale,” and you have an extraordinary opportunity to do the wisest thing on Wall Street: buy low and sell high.
If you’re breaking into a cold sweat at the mere thought of buying a stock in this market, let me encourage you. If you do your research as you’ve been coached to do in dozens of previous The Savvy Gal articles, and if by doing this research you are coming up with two or three stocks whose statistics look really good for the coming year but still have been shaved price-wise, if you like these stocks but are just unsure about the surrounding market, then go ahead and buy. Nibble. You don’t have to buy full positions all at once. After all, they still may correct and come down even lower in price. But stick your toe in. Get the feeling of buying when everyone else is selling; see how it registers in your soul.
(It’s not so bad, is it? Kind of makes you feel like a maverick.)
The great analogy for women for this kind of action is the wonderful dress you fell in love with at Nordstrom a month ago. You wanted to buy it, but you just couldn’t justify the price tag, so you walked away. You knew someone else would wind up with it and be adorable in it, but that’s life. You’re a big girl. You can deal with it. Now you go back to the same department, and the dress (in your size) is still there! There is a God! But wait, there’s an even greater blessing: the dress is now half the price!
If you were even for a second thinking of buying it before, now that it’s reduced by 50 percent, of course you should buy it. It’s the same dress; nothing has changed about it at all. It’s just that supply and demand — the great arbiter of economic equality — has rendered your dress discounted.
Why wouldn’t you buy it at the reduced price? Given the fact that nothing else has changed (no incendiary material was discovered, the dressmaker still remains one of the top in the field) except the price, you’d actually be a fool not to take advantage of the sale. (This is what I tell my husband … I say I actually saved him money by buying it on sale. Then, while he’s scratching his head trying to figure that out, I hang the dress in my closet.)
With the purchase of a stock on sale, the added benefit is the expectation of the stock price increasing during the weeks and months ahead, and when you do decide to sell it, you can make a nice profit, which is, of course, the name of the game in investing.
Profit. However you can eke it out, do it. If it means buying when others are selling, make sure you know what you’re buying and why. If it means selling before everyone else starts to do so, not getting greedy, do it. A profit is always better than a loss, so always make sure you aim for being in the black.
In this kind of volatile and ugly market, being wise is always a good thing, but it doesn’t mean you always have to stand on the sidelines and do nothing. You just have to be wiser about the stocks you’re hanging in your closet!