As I flew over the handlebars on my racing bike, my only thought was what an IDIOT I was for hitting the brakes too hard.
Next thing I knew, I was pulling myself off the pavement with a fractured shoulder and a bruised ego. This was NOT how my race was supposed to go.
And the entire incident could have been avoided if only I hadn’t overreacted to a minor danger I saw ahead of me.
With the recent selloff in the market, many investors are making similar over-reactions. And for some, these overreactions can send them hurtling toward financial injury.
Today, I want to show you what’s really going on in the market and show you how to protect — and grow — your wealth.
Decisions made in fear are rarely productive. But there ARE some decisions you need to make today that could have a long-term effect on your retirement…
The last five days have been quite a challenging time for investors…
It all started when the Fed cut interest rates last Wednesday, but Chairman Powell essentially told investors not to expect too many more rate cuts in the future. This disappointed investors who were counting on steadily lower interest rates to help keep the U.S. economy expanding.
From there, things just got worse…
On Thursday, Trump announced that the U.S. would levy tariffs on all remaining imports from China that had not yet been included in the trade war.
And then over the weekend, Chinese officials allowed their yuan currency to depreciate against the dollar. This was a clear shot at the U.S. economy, escalating the trade war to include a currency war as well. That move by China is what caused the panic on Wall Street, sending the Dow 767 points lower on Monday.
Just like in my bike race last year, many investors overreacted. They squeezed the brakes too hard and sold their stocks. And now, they’re nursing their wounds on the sidelines.
But that’s not how you build lasting wealth for yourself and your family.
When it comes to turbulent periods in the market, the last thing you want to do is make impulsive decisions and overreact. So as we work our way through this period of uncertainty, I’ve got three pieces of advice to keep your investments in the road.
First: Commit to Making Small Adjustments
As the father of four teen drivers (yikes!) I’ve given my fair share of lectures about making small adjustments.
You don’t want to slam on the brakes (unless it’s an emergency). You don’t want to accelerate too quickly. And when you’re traveling at high speed on the freeway, just a small turn of the wheel can make a big difference.
The same principles apply to managing your investments. Especially during times when the market is moving quickly.
Unless it’s an extreme emergency, you don’t want to hit the brakes too quickly. In other words, don’t be the guy who panics and sells all of his positions because of one bad week in the market.
If you feel uncomfortable with your positions, it’s OK to lighten up a bit and sell some shares. But don’t exit everything at once. Chances are, you’ll be selling at the lows only to watch the market march ahead without you.
Often the best decision you can make is to make a small adjustment to which stocks you’re holding. Which brings me to my second piece of advice.
Second: Look for Stable Stocks That Pay Generous Dividends
During the past week’s selloff, some of the hardest-hit stocks were also the most speculative names on Wall Street.
But stocks of companies that have reliable profits were able to sidestep the drama.
To find the most stable stocks on Wall Street, think about the places you’ll spend money regardless of what happens in the economy.
Even in the worst of times, most consumers still pay their electric bills and buy day-to-day products like personal care products. And so stocks of utility companies and in the consumer staples sector typically hold up well even during volatile periods.
It also helps that most of these stocks pay generous dividends.
In a time when the Fed is cutting interest rates and investors are looking for better ways to make extra income from their wealth, dividend stocks can become very popular.
So it makes sense to move some of your wealth into these areas that pay you quarterly dividends and generate “boring” profits like clockwork.
Third: Consider Some Protection With Gold
Over the last few months, I’ve been talking a lot about gold and gold mining stocks.
With the Fed cutting interest rates, international investors are moving wealth out of the dollar. After all, they can’t earn as much interest with the Fed cutting rates.
This trend is causing the U.S. dollar to weaken. And it naturally takes more “weak” dollars to buy an ounce of gold. So this trend is naturally pushing the price of gold higher.
Today, you can invest in gold — or in gold mining stocks — to help protect your wealth from a pullback in the market.
Gold is trending higher, and recently hit its highest level in years!
More importantly, gold could have a long way to go.
The last time the Fed cut interest rates, gold spiked to $2,000 per ounce. And based on the emerging currency war with China and other global risks, I think this time the price of gold could eclipse $3,000!
Gold is currently sitting below $1,500 per ounce. So there’s plenty of room for the yellow metal to keep running higher, giving you profits for months to come.
Get Back on the Bike
Maybe you’re one of the investors who panicked and sold stocks this past week. And now you’re on the sidelines wondering if it’s too late to get back in.
When I had my bike wreck last year, it took me a few minutes to pull myself together. I still had 40 miles to bike and 26 miles to run before I made it to the finish line. But I figured I didn’t need to use my shoulder to pedal a bike or run — so I got back in the race. I didn’t post a stellar time, but I made it to the finish line.
The same can be true for you!
Maybe the market took a chunk out of your savings this past week. Maybe you’ve been stung a bit and you’re not sure how to move forward.
I’d recommend taking the advice above…
- Make small adjustments
- Look for stable dividend stocks
- Consider some protection from gold
And slowly get back into the race.
And don’t worry, here at The Daily Edge we’ll be keeping you on track by alerting you to the best opportunities to grow and protect your wealth along the way.
Here’s to staying on the bike!