Many stocks are currently in a bear market. Stock market losses are adding up, especially in the tech sector. Netflix, Shopify, Zoom, and other high-flyers have all been literally taken apart. Even the market-wide S&P 500 is down nearly 20 percent from its all-time high. Some investors are now getting nervous. Again! I can’t wrap my head around how people can lose their nerve when facing the recent price declines. What were these fools thinking?
Crashes come in several waves of stock market declines
A bear market runs in several phases and can last for several years. Multiple waves have already hit the stock markets. Have we now reached the bottom? There are a number of indications that we have, especially since sentiment has reached an all-time low. Many investors, therefore, expect a strong recovery. But what does that mean? No one can time the stock markets. No one can say where we are right now.
The last few months have made me think
In recent months, I have had little interest in finance, given the current crimes in Ukraine. Nevertheless, I have had a lot of time to think. And again, I realized how little desire I actually have to constantly hear the same stories and forecasts.
For more than 10 years, the stock markets have been such a hobby that they have taken up large parts of my life. I have been investing my own capital for almost 10 years. For 7 years, I have been following my strategy. That’s not a long time, but in that period alone I’ve always seen the same patterns.
Investors are constantly giving importance to upcoming events and then trying to make forecasts. And no one seriously reflects on themselves and the forecast they made.
Much worse, when crash prophets have been predicting the collapse of the financial system for years and therefore advised to invest in commodities and Bitcoin, they are now celebrating themselves for the fact that oil prices are rising, although Bitcoin losses are completely offsetting the gains and the financial systems in Europe and the US have still not collapsed.
And in the comments sections, these scammers are celebrated. It’s frustrating.
A correction and stock market losses were imminent, but the timing wasn’t
The last ten years, which have been extremely successful, have spoiled investors. But it was also one of the longest bull markets. It must have been clear to everyone that the party could not go on forever and that stock market losses were imminent.
But this does not mean that the exact moment of the crash, the bottom, or the start of a turnaround can be predicted. And that is exactly the problem with trading. Patterns hold until they break, and just because a pattern has held three times doesn’t mean it will hold a fourth time.
So from here, we have several possible outcomes. Stocks can continue to fall, continue to rise or go flat for the next week, months or years. Many investors won’t believe it, but that’s the best forecast you can get.
No one in this world will be able to tell you which of these scenarios will come. And if someone could, then he belongs to the monkeys who grabbed the right banana out of luck. Never forget the forgotten failures! Always remember that there are no shortcuts in life.
What I do – the strength lies in tranquility
I have mentioned above the three scenarios that can occur. No matter what I do, I always act in such a way that I do not get into trouble, no matter which scenario occurs. That is the basic condition.
After that, I keep it very simple. I invest in relatively cheaply valued stocks that generate a lot of profit and positive cash flows. I become the owner of these companies that produce products or provide services. For me, stocks are not betting tickets on rising prices but a cash-producing asset.
These companies should distribute large parts of the profit to me via dividends so that the management does not get any stupid ideas and uses the remaining capital sensibly. This way I generate a passive cash flow which I use for further investments. If the shares fall, I am happy because I can buy shares cheaper with my incoming capital.
I stubbornly and steadily invest capital in such companies every month. I diversify into as many industries and regions as possible.
Yet, I don’t touch companies that are not profitable or have exorbitant valuations. I only make a few exceptions here. I have invested in TeamViewer, Palantir and some other small-cap growth stocks for various reasons. This is venture capital for me, and I can live with it if I suffer total losses here.
Investing is accordingly easy. If you want it even easier, invest in an ETF. My wife does that, and her performance is not worse than mine. The difference is that I spend several hours a day on stocks while she spends that time massively pushing her career and jumping from pay raise to pay raise. I wonder who is smarter?
Otherwise, there’s not much to say that I haven’t said elsewhere: the strength lies in tranquility:
Despite the macroeconomic upheavals, I remain calm. I buy shares every month. Mostly it’s four to five purchases for my cash flow portfolio and now and then additional investments in growth companies. I have time on my side. I am in my early thirties, and it would be wrong if I worried about the future all the time. If stocks drop 20, 30, or even 50 percent, so be it.
In the meantime, I will use the many ways to escape the fast pace of everyday life and come to rest. A walk through the misty forest on the outskirts of the city. A rowing trip at dawn on the city lake with friends. Afterward, a coffee, a breakfast with music from a vinyl record, read by a diamond. Life can be easy.