By 1:30pm on Friday, February 09, 2018, the Dow and the S&P had already dropped 10% to 12% from both of their all-time record high on January 26, 2018. The Dow and S&P 500 continued to fall from their record highs and met a temporary support level on Feb. 06, rebounding for a bit, until both indices started tumbling on the opening of February 08th. By Feb. 09, we witnessed a relatively small market correction from record-high closes. Both the Dow and S&P were able to end that Friday positive, with 1.4% gains, and 1.5% gains respectively. As most investors wait to see what the future brings us, some investors hope that the Dow and S&P continue to rebound and increase from current positions of about -8% to -10% from their most recent new record-highs.
The minor market correction scared many investors and made them unwilling to buy stocks, as they wait until, what seems like a temporary "market correction" is over and fully recovered from. Investors seem to have ignored the fact that the stock market, measured by the Dow and S&P indices, have been performing exceptionally well for the past couple of years, even after factoring in the wild elections and the uncertainty around Trump's fiscal and economic policies. Stocks have had a great bull run, dating back to March 2009, immediately following the stock market crash of the 2008 Housing Crisis. In fact, both indices are up about *+150% for the 10 year, currently down from their most recent record-highs. (*At the time of this writing.)
The 2008 crisis resulted in a 50% to 60% recession that scared many investors away from all types of investing, as they rushed to cash and gold. The drop that resulted from the 2008 crisis makes the latest 2018 minor market correction, look like a regular volatile swing in the stock market. Similar to how investors forgot how the stock market rebounded and recovered from most of the loses from the 2001 .COM bubble, greedy investors with little market discipline, forgot how relatively quick the stock market rebounded and recovered from the 2008 crisis. If you look at the markets after each recession, you’ll notice the rebound that immediately occurs following a recession, and or stock market crash, and you’ll notice the new levels that are reached afterwards.
What investors lacked then, as they sold their shares during the corrections, and what they currently lack, is patience and self-control. Investing is not for everyone, you must be able to put aside ALL of your emotions, your conscious biases, and bad habits. You must be patient and practice non-conformism by doing the exact opposite of these impatient, amateur investors. While everyone is running to sell their shares, be a contrarian and buy more shares on the way down, if you truly believe in the company. If you choose to sell SOME of your shares, to cash in profits and avoid being greedy, then you are moving smart. It is only when you choose to sell ALL of your shares and dump stocks of a well-positioned company, that you make the common mistake of undisciplined investors. The main reason one is to buy the stock of a company is because they believe that the company will be around for the long-term, regardless of changes to consumer trends, global trends, and regardless of market and economic downfalls. Why would you want to sell a long-term company that fits fundamentally and is large enough to withstand most crashes? You should be willing to buy it as it crashes and take advantage of great companies at low prices.
Nobody, regardless of their career experience, their financial status, their investment track-history, can time the market and time the bottom of a recession. For that reason, you must be disciplined enough to create a buying plan while stocks are on their way down, resulting in a constant lowering of your average cost per share on your investments. Dollar-cost-averaging is another great way to automatically buy on the way down, by frequently buying the same dollar-amount for set periods, resulting in lower cost-basis for your investments. You will end up having more shares, and your cost per share will be a lot lower than prior levels, and closer to after "crash" prices. Wait until the market enters an economic recovery phase, and ride the next bull-run up. If you do not believe markets can ever rebound, or reach current price levels again, and/or you do not have the stomach for this uncertainty, than you should NOT be in stocks.
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