The Worst Thing You Could Do Right Now

Most people keep a significant portion of their net worth in the stock market.

Most people are panicking right now and selling.

Most people are going to lose a lot of money.

Don’t be like most people.

The volatility we’ve witnessed over the past couple weeks is a prime example of why I’m not a huge fan of the stock market. Granted, we’re experiencing some extreme circumstances at the moment, but still, the potential for rapid fluctuation has always existed.

With that said, I do keep a bit of money in the stock market, mostly for diversification and liquidity purposes, and I can imagine the psychological turmoil a lot of people are probably feeling right now as they watch the floor drop out from beneath their life savings.

Now, when this happens, many people’s first instinct is to sell. In fact, that’s a large part of what’s causing the rapid drop in value.

Humans, for all our glitz and glamor, are just herd animals after-all. Once a couple of us start stampeding towards the cliff, the rest inevitably follow.

That is, unless you can resist your animal nature and don’t sell.

There’s probably nothing worse you could do for your long-term financial health than to liquidate your holdings after witnessing the market plummet.

Why?

Because you only ever really lose when you sell. Until that point, it’s all just numbers on a screen.

When asked how much he lost in 2008, Warren Buffett responded, “Not a damn thing.”

Do you know why?

No, not because he was somehow magically invested only in companies that didn’t lose value during that period, it’s because he never sold and locked in the losses.

Investing is a great metaphor for life, You only really lose when you give up.

So definitely don’t give up. In fact, when the market slides like this, it can be a great time to start buying at a discount.

The only reason you wouldn’t, logically, is because you believe the stock market will never return to where it was. If you know anything about market cycles, you’ll know why this is a silly position to hold.

But crazier things have happened.

Okay, with that said, what can you do to mitigate the risk of experiencing this crazy net-worth-roller-coaster ride again?

Like I mentioned before, I only hold a bit of money in the stock market. The majority of my investments are in real estate, which delivers superior risk-adjusted-returns even when the stock market is booming, but especially looks good at this particular moment.

Why?

Because even in a pandemic, people still need a place to live. Our properties have retained their value, cashflow is still coming in, and the tax benefits haven’t somehow disappeared over night.

Now, I’m not saying you should liquidate your stock market portfolio, but I’d highly recommend you start researching how you can get started investing in real estate. There are a ton of ways to get involved.

At Invictus Capital, we syndicate apartment buildings, which is just a fancy way of saying, we pool together resources with a group of passive investors to buy big cash generating buildings. One of the great things about this model is that it provides a passive investment opportunity to people who have the capital, but lack the time, desire, or education to manage a property themselves.

The stock market will likely pull out of this downturn at some point and start clawing its way back up, and when it does, I hope you give a closer look to your investing strategy and ask yourself, “Do I really want to experience anything like that again?”

If you’d like to learn more about getting involved in real estate, shoot me a message and I can recommend some great books and podcasts to get your education started down that path.