BUYING EQUITIES ON SALE!

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So you are thinking about buying a new car?  Year-end sales are coming in a few weeks and the car manufacturers will discount thousands of dollars and offer zero interest.  Do you buy at today’s full price or wait?  Personally, I wait for sale prices for clothes, electronics, vehicles, equities, etc.  The stock market gives you sale prices when the market corrects and drops a few percentage points.  This is not the time to panic sell, if you have good funds {S&P 500 Index Funds, etc} or good stocks in your portfolio. I know this because in my early investment days I would panic and sell. And each time I would watch the market climb back as I was sitting on the side waiting for the “perfect” time to get back in. Sadly, this approach cost me thousands in profit!

On January 26, the DOW closed at 26,617.  By February 8th, the DOW closed down to 23,860, a ~12% decline.  In hindsight, it is easy to see what we should have done.  I decided NOT to sell, and instead I purchased more equities when the prices were moving up.  Why, because this was within the normal expectations – see below points. Ignore the talking heads on the FB, Twitter, the news and financial shows.  Remember they are paid to fill silence and escalate a typical correction into doom and gloom.  I was watching CNBC (finance channel) and they dramatically opened a segment with doom and gloom music with “MARKET DOWN 1100!!” flashing on the screen. In my opinion they are working to deliberately create an air of panic. Let’s put this in perspective.  The DOW, was around 25,000 that day.  A 1,100 point decline represented a 4.4% decline.  Yes that is significant.  But just 18 years ago, if the market suffered a1,100 point decline that represented an 11% decline.  A much bigger deal.  The talking heads will not give you a reasonable perspective. So my advice is to turn the TV off and stop checking Twitter every five minutes.

On February 16th, the Dow moved back to 25,367, a ~6.4% recovery. Where will the market go next?  I have no idea.  It is important to note these ups and downs are within historical norms.

CORRECTION REMINDERS TO HELP CALM YOUR NERVES
• The market will decline two percent or more about five times per year
• About every five years, the market will decline 30+% {And yes we are overdue.}
• Markets increase typically three out of four years
• Over long periods (years) markets beat inflation, unlike bank savings accounts
• You will never become wealthy, selling at the low point and reentering the market at the high point.  Which is exactly what your instincts say to do.  Suddenly (after a few days) the market is down 12%.  Your $200,000 you held yesterday is now worth $176,000.  It took you years to accumulate the $200,000.  Your instinct screams sell and you do to protect the remaining balance.  Two questions you now have to answer: 1. Do you re-enter the market or buy that expensive car your brother-in-law has?  2. If you decide to re-enter, when?  Majority of people who sell their equities, sit on the sidelines as the market slowly comes back.  You finally re-enter when the market is up say 10%.  You re-enter the market with your $176,000.  You missed 10% of the recovery. You will never become wealthy, selling low and buying high.
• Never make important decisions based on emotions and fear (life lesson)!
• The best time to buy any product, is when the product goes on sale.  Everyone likes a great deal.  But we tend to shun equities when the price is steadily decreasing.  If you have done your homework and this is a good Fund/ETF/Stock, you should be happy to buy when the price is lower.

BUFFETT GOES SHOPPING
Warren Buffett went shopping in late December, 2017. Buying Berkshire more Apple shares and starting a new position in Teva pharmaceutical. It was Berkshire’s purchase of tens of millions more Apple shares which served as the most interesting trade by Berkshire chairman and CEO Warren Buffett. The famed investor had already sunk billions of dollars into the stock and has already made billions of dollars profit. Loading up on more Apple stock in the fourth quarter highlights just how bullish Buffett is on Apple’s future. Clearly he believes the stock will continue to grow in value.  Berkshire began buying Apple stock in early 2016 when shares were trading significantly lower. However, Berkshire really got serious about Apple stock in the fourth quarter of 2016 and the first quarter of 2017, when shares were trading in a range between about $108 and $144 — still well below Apple’s stock price today of about $174.

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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