PANIC?!?!?!?!
“Be fearful when others are greedy and greedy when others are fearful.”
- Warren Buffet, Berkshire Hathaway, Inc. "Chairman's Letter, 1986”
I’ve come to think of the stock market over the last few months to be like the plate spinner on Ed Sullivan.
Eventually the wobble gets worse and worse until the whole thing comes crashing down.
Doesn’t it seem like that’s what is happening now? One day we’re up 500 points, the next day we’re down 500 points. Scary, no?
No, I don’t think so.
I believe this is just the market absorbing shocks of war, Covid and bad management of our country, including high energy prices and inflation. All those things are slowing down the plates and making them wobble. But that’s just my thinking.
I hope you’re not scared to death worrying about your money. When people get to that point, they tend to make very serious mistakes.
I’m not a financial adviser and am not responsible for anyone’s investments but my own. I’m not going to tell you what to do – I just want to give you some ideas to consider. Maybe this will help you weather the current storm and prepare for the next.
Don’t Panic.
If you look back at the last crash in 2008 the market decline was shaped like a V. Granted the V was over many months but the market did recover. If you were lucky enough to have sold at the top of the market right before the beginning of the crash and then bought back your investments at the bottom of the V you made a boatload of money. But seriously, probably only three people actually did that.
Of those who did something during the 2008 crash, most people panicked near the bottom of the V, sold everything and took a huge loss. Then, after the market recovered, they bought back a fraction of what they had before the crash.
Don’t be that person!
I have some thoughts on how to survive. But I emphasize: you make the decisions that you can live with and that will let you sleep well at night (SWAN). As Tracie would say, “you do you.”
How Bad is it Today?
Yes, we’re hearing about huge swings in the Dow Jones Industrial Average and NASDAQ indexes, but what does that mean to you and me? Well, I don’t know what your portfolio looks like but here’s mine for 2022 (as of May 10, 2022):
I don’t see anything to panic about. My value is down, but only to the value that it was in late March. And in late March I was on cloud nine when I looked at how well my portfolio was doing.
Full disclosure: My portfolio is made up of 35 individual stocks. It’s conservative with a lot of utilities, consumer goods and energy. I don’t invest in mutual funds or exchange traded funds (ETFs). Even though I’m retired I’m not presently taking distributions, so the chart above is the true value, including dividends for 2022.
Dollar Cost Average – Adding to Investments
If you’re still working and making contributions to your IRA or 401K, keep making contributions. Contribute as much as you can and always take full advantage of any matching contributions your employer makes.
Should the market drop, and if you can afford to, maintain or increase your contributions. You’ll be buying more shares in a company or mutual fund while the price is low. This “dollar cost averaging” will give you a lower cost per share and will yield better returns when the market recovers.
I can’t say whether you should change the companies you’re investing in or the types of mutual funds you’re buying – that’s way too complicated a discussion for my little blog. You should to seek the help of a professional for that advice.
Dollar Cost Average – Withdrawing Retirement Income
If you’re retired, and am under 72 years old (the point where you need to start taking the required minimum distribution, or RMD), try to decrease the amounts you’re pulling from your retirement.
If you have sufficient savings in a non-retirement cash account (savings, checking, money market, etc.) try substituting withdrawals from the cash account in place of withdrawals from the retirement account. Not only will this reduce your taxable income, but you will not be selling shares at a low price. You may have the time for the market to recover somewhat before you need to tap your retirement account again and sell shares, hopefully at a higher price.
Dollar Cost Average – Withdrawing Retirement Income with RMD
If you’re 72 or older and are withdrawing more than the RMD, see if you can substitute cash for the excess amount and only withdraw the RMD. Again, this will minimize the number of shares sold and decrease your taxable income.
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In the next blog I will describe an investment strategy that can take a lot of the worry out of the market. It’s a strategy I use and I can tell you, I’m a lot less worried about the market than I ever used to be.
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"If the success of your political movement, your national ambitions, or your wars, depends upon the need to censor dissent and silence your adversaries, that's a pretty strong indication that you have zero confidence in the beliefs you want to propagate, probably for good reason."
- Glenn Greenwald
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A Mighty Wind
I moved to the Bethany Beach area four years ago. I’m a beach person and love the beach life. But I just experienced something that is totally new to me and many of my friends. In fact, none of my friends who are locals have experienced anything quite like the nor’easter storm we’re experiencing right now.
We’ve been having winds of 25+ MPH since last Wednesday May 4. As I write this on Wednesday May 11, we’re still getting 25+ MPH winds. There were times during these eight days that wind gusts hit 50 MPH. We’ve had nor’easters before, but they tend to blow into town, make a mess and move on. This storm stuck around.
This morning on the Bethany boardwalk, the temperature was 55° and the winds were 25-30 MPH. It was COLD! The 9:59 Club huddled at the Turtle Beach Café. The discussion was hot (as always) but our tushies were freezing!
Eight days of 25+ MPH winds have taken a toll on our beautiful beaches:
What you can’t see in this picture is at the end of the dune’s ramp, there’s a 2-3 foot drop-off. Rehoboth Beach, Dewey and Broadkill beaches have been decimated as well.
The northeast winds have blown ocean water inland. The Indian River Bay is at an unusually high tide as the wind keeps the water trapped. My VFW sits on the bay and at closing last Saturday night the bartender couldn’t open the rear door because the wind was so strong against it.
Pennsylvania Avenue in Bethany Beach is two blocks from the ocean. It does flood during some high tides, but it’s been flooded for days:
Fortunately for area residents there have not been significant power outages or wind damage. But last Friday night a house near the bay was struck by lightening and is a total loss.
For those readers who don’t live here, I thought you’d like to get a glimpse of the part of beach life that’s not often seen.
Oh, and I LOVE THE BEACH! I wouldn’t trade beach life for the world!
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Diet Tip
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