The Market Is Going To Crash | What You NEED To Do

Earners,

Last week, it seemed like everyone—from your grandma to the guy at your corner store—was suddenly concerned about the stock market. People who typically don’t care much about finance were suddenly engrossed in stock market news. It was a bit surreal, wasn’t it? But what’s more surprising is how such a minor event caused a major sell-off. The stock market can be irrational at times, leading to these moments of widespread concern. Personally, I wasn’t fazed by it. I’m hardwired to think long-term when it comes to investing, and because of that, I genuinely didn’t care. But I know many people were feeling a bit panicked, wondering, “What’s going on?”

I’m here to remind you of something crucial: your investments will lose value at times, and that’s perfectly okay.

The Path to Financial Freedom

The journey toward financial freedom and independence is paved by purchasing assets with your hard-earned money. I often emphasize the stock market because it requires minimal effort to manage compared to other investments like properties or lending. Moreover, it offers the potential for substantial returns, enough to secure a very comfortable and wealthy life.

However, there's a catch: you’re probably going to lose value in your stocks and ETFs at some point. In fact, I can almost guarantee it. But here’s why that shouldn’t worry you...

Understanding the Nature of Stock Market Fluctuations

When you invest in an S&P 500 index fund or an exchange-traded fund (ETF), you’re buying into 500 of the largest and most successful companies in the US. Stocks are typically very liquid (easily converted to cash) because they are constantly being bought and sold, leading to price fluctuations based on market activity. These fluctuations can occur for reasons that may seem insignificant—or even for no reason at all.

The stock market is driven by human behavior, and humans are inherently irrational. This irrationality extends to the stock market, where even companies with healthy earnings, profitability, and excellent management can see their stock prices drop by 10% in a single day without any substantial reason. The presence of algorithmic trading by hedge funds and traders adds another layer of complexity, where technical reasons can cause additional volatility (wild swing up and down).

A well-known adage said by Warren Buffett, originally from Benjamin Graham, states: “In the short term, the stock market is a voting machine, but in the long term, it’s a weighing machine.” What this means is that while the stock market may reflect irrational, short-term fluctuations, it will ultimately value the long-term success of a company correctly. This is why the best companies will continue to thrive in the long run, despite short-term volatility.

The Importance of Long-Term Perspective

With individual stocks, it’s incredibly challenging to predict which ones will perform well consistently. That’s why I advocate for investing in index funds/ETFs. Some of the best traders and investors worldwide, who spend billions on research and analysis, still can’t consistently outperform the market or the broad-based index funds I talk about. These funds, whether U.S.-based or international, provide broad market exposure with minimal effort. Essentially, you can do better than many professional traders by simply investing in index funds.

Many of you earn substantial incomes, and if you can allocate a significant portion of that income to the stock market, you’ll be setting yourself up for ridiculous financial success at a young age. However, the only way to achieve this is by staying invested, even when the market gets volatile. When your gym trainer or the guy at the station, who never usually talks about finance, starts giving you stock tips, it’s crucial to stay the course. Stick to the plan: buy, hold, and keep buying and keep HOLDING!

How Did You Handle Last Week's Volatility?

Any thoughts on last week’s market fluctuations? Did you make any moves you regret, or are you happy with your decisions? Maybe you bought more stocks, or perhaps you stayed put. If you did nothing at all, that might just be the right answer!

Feel free to respond to this email and share how you navigated the market’s ups and downs. Remember, it’s all about the long game.

Earn more,

Nate