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How the Market Works

Market Crash: Dodging a Down Market

Posted by kdadmin on October 1st, 2015.

Market Crash: Dodging a Down Market

Reporting a zero rate of return over a quarter is not normally cause for celebration. But given the quarter that we’ve had, it’s pretty nice. Avoiding a 7% loss by being in cash, instead of being in the S&P 500 (SPY), is a great first step toward both making money, and being able to live the life you love. As Benjamin Franklin liked to say, “A penny saved is a penny earned.”

Let’s put this in real terms. If you have $300,000 in your account, you just saved $21,000. If you have $2,000,000 in your account, you just saved $140,000. If you haven’t hired me yet, how much could I have saved you? I’ll give you a hint, it’s WAY more than I charge …

The road ahead is a gnarly one. With multi percentage index swings becoming common place, it’s a tough road to hoe. Volatility is likely to escalate as we get into earnings season and the market holds its breath for the next Fed meeting. This is how the market works. Volatility is a wonderful thing, if you have the courage to buy when everybody else has decided Armageddon is upon us. In this case, Armageddon’s name is China. Last year it was Ebola, or Russia, or ISIS. Take your pick.

While the Fear and Greed Index is holding steady at 13 (extreme fear), it’s not “extreme-y” enough for my blood. I prefer single digits. Maybe around October 15th, if Santa is listening …

In the meantime, if you managed to dodge the down market, take yourself out to celebrate your good fortune. The next several months promise to be rocky at best.

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