Table of Contents
2020 The Greatest Sale on Earth
After drought, there is rain
After fire, re-growth
After a stock market crash, there is always a recovery, and then new heights.
Right now, the world is in a state of Pandemic, Anxiety, Bear Markets (heading for a crash), Oil Price Wars and a Banking Sector teetering with uncertainty.
Add to that, the devastation caused by droughts, fire and livestock loss in
Australia and no wonder people are feeling uneasy.
Calm (and Greed)
When the world is in crisis, I’ve learnt to stay calm and then I get excited!
Because, throughout history, whenever there is catastrophe there is always a silver lining (if you are willing to search for it) and these are the times when the greatest opportunities present themselves.
Right now, for the astute investor, there is a massive global sale going on.
It is the greatest sale on earth, and certainly the best sale in 10 years.
I am of course talking about the stock markets, which have moved from a huge 2019, to a state of correction (-10%) to a bear market (-20%) and possibly on their way to a crash (-30%).
Companies, LICs and ETFs and Index Funds are trading at incredibly discounted prices.
The investors who take advantage of this market drop now, will be laughing 3-4 years down the track because they will be picking up bargain prices for the companies listed on the stock market.
In the end, the market always goes up, past all previous highs (even before a crash).
I can also guarantee you there will be more crashes (probably even another GFC size crash in our lifetime).
But again, this does not matter, if you just leave your money in the market, it will go back up again.
Think about it this way. On the stock market you can only lose 100% of the money you invest. No more.
On the upside, you can earn infinity % on your initial investment. There is no limit to how the stock market can climb.
That’s not a gamble, it’s a no brainer.
Limited downside, unlimited upside.
Most people get caught out trying to outsmart the market.
Like getting scared and selling their plunging stocks or selling stocks which have already plunged 50%. This is called “realising” the loss.
If you never sell, then the loss is only a loss on paper, which can recover.
Also, trying to time the market or trying to pick stocks fails 100% of the time, it’s a mug’s game.
Research is showing that simply putting your money on a low-cost index fund like the Vanguard VAS ETF, and just leaving it, is the smartest way to invest over the long-term for 99.99% of investors.
Australian and US Stock Markets – Crashes are inevitable…then…they always go up!
Case Study - Fidelity International
In fact, Fidelity International conducted a famous study between 2003 and 2013 where they analysed the categories of investors who performed the best.
What they found was that on average, all investors as a group, performed worse than the actual Fidelity International fund itself (excluding management fees).
How could this be?
Fidelity looked more closely into it and chunked the investor types into a number of different categories.
Very quickly saw some funny and astounding results!
The best performing investors were dead people!
The runners up, were people who had set up funds and totally forgot that they had them.
So, what does this mean for me and investing right now while the greatest sale on earth is happening all around me, i.e. while the stock market is crashing?
Firstly, humans are terrible investors and 99.99 times out of 100 if they start trying to time the market or pick stock winners, they will perform far worse than the market.
Secondly, if you want to do well on the stock market then simply buy a low-cost index fund that tracks the market.
Also, do it regularly and consistently and never sell, then open it up again when your 65 and hope that you have a good heart!
Okay so here are some practical steps to apply so you can capitalise on the greatest sale of the past decade.
Practical Steps to Take Advantage of the Greatest Sale on Earth
- Set aside as much lump sum cash as you can while leaving a small amount for an emergency fund and some rainy reserve also.
- Pick a low-cost index fund to invest in. I recommend the Vanguard VAS, low cost index ETF.
- Wait for the market to start to climb again, then invest the lump sum.
- Restructure your weekly expenses and savings (finances) to put as much cash into index funds as you possibly can. Do this over the coming months and years as the market climbs back out of the lows.
- If you don’t have a brokerage account, then set one up. I recommend using Self Wealth. They have the lowest cost trading in Australia and have won Money Awards Best of the Best 2020 Award for their services.
- Click “Buy”.
Be the Outlier.