No matter how expectant we are of stock market corrections, they never occur in a manner that we are prepared for. These corrections come about in ways that make us question economic stability until we emerge from them, and for that reason, we often find ourselves either selling at or near the bottom or sleepless. Investing is hardest in times like these and therefore we often find ourselves being afraid to invest in the stock market when we really should’t be. I believe if we were buyers at the top, we should be buyers on the correction as well.
In fairness, apart from lucky guesses that make people stars overnight, no one can accurately predict temporary tops or bottoms. We only really know these levels after they have happened, and therefore we should be prepared to take action in uncertain times. For what it is worth, I will share some ideas of what I am doing in this cycle.
My first approach is to use money I won’t need for a long time and this is always my approach to investing. This is typically money set aside for investing as demonstrated in savings examples like I mentioned, where much of that money sits in Money Market funds of different sorts, waiting for proper investment opportunities. I have already started accumulating shares of companies I like as I previously indicated. I do not know if we have made a market bottom or how long this will last, but will keep doing this over time, which means I may be buying more at higher or lower prices than my initial purchase prices.
I’ve also embarked on another angle of passive investing using Robo-advisor accounts, which let you invest based on your objective and risk tolerance. Two examples of these can be found at Fidelity Investments using their Fidelity Go product and Ally Invest’s Managed Portfolios. Fidelity Go charges a fee while Ally Invest has an option that doesn’t, but they both offer different exposure and services so therefore different opportunities. Fidelity also deposits and puts the money to work faster. Using the Robo-advisor tools, I deposit money periodically into those accounts to take advantage of dollar cost averaging, similarly to what I am doing with individual stocks.
Even though the market has lost about a third of its value, we should realize that it has only been about three years since it surpassed the levels it currently is. However, what is striking is that there are individual companies that are at levels they have not seen in over a decade, and therefore offering great opportunities.
These are trying times for all especially from a health standpoint. However, we should still be putting things in place to help make our lives better when we emerge from this crisis.