Coronavirus: Buying the Bottom of the Stock Market

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Coronavirus: Buying the Bottom of the Stock Market

So recently, I’ve been getting e-mails and phone calls because people are thinking about getting into the business of stock trading. I understand, everyone wants financial freedom, and if this is a way of making money, why not?

I have doctors, lawyers, and engineers who are ready to call the bottom of the market, and every time the market goes back up, they get depressed because they didn’t buy the previous bottom. The opportunity to get rich quick is hard to resist for everyone. As a matter of fact, people who barely pay attention to the stock market are positive that now is the time to buy the bottom of the market and are ready to throw their money and hope for the best. I have heard it so much that I felt it’s time for me to address it…Not to advise you about the right time to buy but to deter you from making a dumb decision.

No one knows the bottom

First off, people who wake up and drink their coffee to the stock market can’t identify the bottom. The stock market is complicated. Think about it for one second, take your own job/career, there are rules or processes that you know like the back of your hand. The reason you know these things is because you wake up and drink your coffee and start your workday with whatever it is you do, and you do it all day—you know and understand your career field.

If stockbrokers and financial professionals don’t know the bottom (in their own profession), then you don’t know where the bottom is either.

I don’t care who you got the information from; your friend on Facebook doesn’t know where the bottom is, and now is not the time to act.

Most of you need to pay off debt anyway

Most people are in debt. My advice to my clients is that if you are in credit card debt, you have no money. Let me repeat this; if you’re in credit card debt and you can’t pay that credit card debt off, then you don’t have any money. You are broke. That means that you don’t have enough money to invest in the market—at least not enough that would be life-changing anyway. For instance, if you were to invest $1,000 after a year, if you got a 30% rate of return, you would make $300.00. It’s good money, I’m not going to lie; however, you can also lose 30% if you don’t time that market just right.

It would be better to pay your credit card debt off which gives you a guaranteed rate of return. If you have an interest rate of 16%, then you save $172.00. My advice is to focus on paying off debt to give you the extra freedom to handle financial emergencies or the freedom to spend more.

Don’t bet money you can’t lose

My third point, please don’t bet money you can’t lose. You need to invest it and almost not care that you may lose it. You have to almost fire and forget—invest the money and don’t think about it again. If the market does go down, you’ll be crying, and I am not the friend you want to tell you did this.

Me:  You did what?
You:  I invested $50,000, and now it is worth $25,000. What should I do?
Me:  Shoulder shrug…
You:  But I needed that for my kid’s college
Me:  Shoulder shrug…
You:  But you’re a financial advisor
Me:  I didn’t advise you to do that!

In that situation, the best thing to do is accept your losses and consider it a lesson learned—don’t ever do that again.

Either be happy that it worked out or indifferent that it didn’t work out, but if you’re going to cry in your soup over it, please don’t invest the money. It isn’t wise.

The professionals are out of the market

I am not a big fan of flying. I know they say it’s even safer than driving cars, and I certainly hear about more car deaths then I do planes going down; however, I don’t have control over planes, so I don’t feel as comfortable, OK? So, when I’m on a plane, I watch the flight attendants to see if I need to be concerned. The sign I am looking for is a flight attendant huddled in a corner blowing snot bubbles while holding her Jesus cross to her lips. That’s a sure sign that I should be scared.

Well, let me tell you, the professionals that I work with (financial professionals) are huddled on the side of the market right now, sitting in cash and treasuries as we speak.

So just like the flight attendants who wake up and drink their coffee to their career who are blowing snot bubbles and holding their Jesus piece to their forehead… finding their religion in this time of crisis… so are the financial professionals.

I am not going to do anything until they come out of their hiding places, born again. I have no shame in following people who know better than me.

My personal opinion

I have an opinion on how this will all go down. However, I hesitate to tell you my opinion. I hesitate because I am well aware that I could be wrong. I am not tethered to this opinion, and in some ways, I hope I’m wrong.

I’m also aware that from the time I write this, the landscape could change, and my opinion will shift with the new information.

My opinion is that this is going to be a long ride. As news continues to come out about this virus, I do not expect great news. I expect the market will continue to go down, but I also don’t expect our economy to get back to normal fast. I believe it will be a slow grind back. However, I also think we will be dealing with this until we either have a vaccine or a more effective way to treat this virus. Without a cure or vaccination, I am not sure where the bottom is; it could be 40%, 50%, 60%, or more. I am under no delusion that it can go down even further than that.

I suspect the bottom will be when we reach the peak of the virus, and we start seeing a reduction of cases. Even then, I would be hesitant to make a move in the market until I see the “flight attendants” making a move. It seems to me that we’d have to have a more stable economy to make smart investments.

I warn you about buying if the president opens up the economy before the health professionals approve it. My expectation would be that he may be forced to reverse that decision if we see a more significant spike in Coronavirus cases.

Economists can’t even agree

Again, I am not tied to this opinion in any shape or form. Economists can’t even agree about what’s going on and what the damage will be after this whole ordeal. My advice is to focus on the things you really can control and continue to try to live below your means. Is buying stock right now living below your means? Would getting out of debt be a better solution for your family?

If you live below your means, you don’t have to worry about what’s going on in the financial world. You’ll only have to worry if you live outside of your means.

If you haven’t already, buy The Financial Effect e-book to get more insight on how to make financial decisions for your family, also subscribe to my blog.

Photo by Edwin Hooper on Unsplash

*Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear a loss, including total loss of principal.