How Often Do Markets Decline?

Depending on how old you are, you may have only experienced a time when the stock market went up.  For people that may have started investing in 2010 or afterward, this week might be very scary.

However…market sell-offs like this one are a very healthy and necessary part of the stock market.

Since 1900, the Dow Jones Industrial Average has fallen 5% or more at least three times per year.  It falls 10% or more approximately once every year.  It declines 15% every two years, and a 20% decline happens every three and a half years.  The average duration of each decline is less than a year.

Overall the market rises three out of every four years.

This is why you have to stay invested and not try to time the market.

Have a good weekend!  If you haven’t yet, please pick up a copy of my book, The Stock Market is For Everyone.  It’s a short read that will provide beginners to the stock market with all the information needed to get started investing.  If you know someone who isn’t invested yet, pick up a copy for that person!  With stock prices lower, now is a great time to pick up those first shares.

Is It Safe To Buy Again?

The answer to this question is:

You should always be buying!!!

Let’s say, for example, you decided to invest $100 a month.  This technique is called dollar cost averaging.

By doing this, you will buy when prices are high, as well as when prices fall.

Over time, as your investment rises in value, the growth you experience can be exponential!  This is because you were buying when markets were down – and that can supercharge your growth.

If you are like me, and your time frame is 10 to 20 years away…and definitely if it is longer than that…you shouldn’t be the least bit bothered by this sell-off.

To answer the question “Is it safe to buy again?”

My answer is yes, yes, yes!

Staircase Up, Elevator Down!

If you’re like me the last five days have been quite painful.  What may have taken several months to build has been wiped out in 4 days.

In the blink of an eye, my account is down 20%.

There’s an old Wall Street adage that goes “staircase up, elevator down”.  In other words, stocks go down a hell of a lot faster than they go up.  Always have and always will.

If you follow us here at Wealthy Joe, you know that we are long-term investors, and we don’t panic.  Panicking is a surefire way to lose money.

At this time, if you have some cash, start lining up the names of companies that you were waiting on to get cheaper.  Then…start buying!  I know sell-offs can be scary.  But that’s when you have to do it!

Remember…don’t panic!

 

Birthday Bonanza, Part 6

Hi, all.

It’s time to talk about how to open an investment account for your child with the $1000 you’ve set aside for this purpose.

What type of account should I open?

I opened a custodial account for my daughter.  I currently control it.  She will take over the account when she is 21.

I think this is a good place to start.

Here is a list of brokerage firms you may consider:

Firm Commission (Per Trade) Minimum Account Balance
TD Ameritrade $6.95 No minimum
Merrill Edge $6.95 No minimum
E-Trade $6.95 $500
Ally $4.95 No minimum
Charles Schwab $4.95 $1000

I, myself have accounts with TD Ameritrade.

I also have a personal account with Robinhood, although they don’t currently offer a custodial account for minors.  I mention it here because Robinhood doesn’t charge a commission, and as such is a wonderful vehicle through which to start a personal investment account for yourself with very little money.  (For more detail, please check out my short investment guide, The Stock Market is For Everyone.)

Watch this space tomorrow.  I’m going to be sharing an episode of one of my favorite podcasts that is geared specifically toward beginning investors of all ages!

 

Why You Must Have Courage To Be A Successful Investor!

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Let me qualify what I mean by “courage” with regard to investing.  I don’t want to ruffle the feathers of people in the military, firefighters, law enforcement, or any other noble profession that requires putting your life in jeopardy!

The kind of courage I’m talking about is going against conventional wisdom.  Conventional wisdom recommends that you don’t attempt to beat the market by investing in individual stocks, and that you’re better off buying a mutual fund or ETF.

Now, if that’s what you decide to do, I have no problem with that.  I’d rather see you in the market in some form or fashion then not in it at all.

However, to be an individual investor takes plenty of courage.  You are putting your hard-earned money at risk without any guarantees.

Sure – we are all great investors in hindsight!  But our inability to forecast the future with great certainty, and to place bets on the future anyway, absolutely takes courage.

How much courage do you need to be a successful investor?

Well, let’s see.

You need…

  • the courage to investigate stocks,
  • courage to buy,
  • courage to hold,
  • courage to hold down 50%,
  • courage to add to winners,
  • courage to not sell during downturns,
  • courage to not panic during bear markets,
  • courage to ignore the media, and…
  • the courage to continue to believe that the market over the long term will go higher.

That’s about all the courage you’ll need to give yourself a chance of winning.

Until next time…be courageous!