𝐓𝐡𝐞 𝐰𝐚𝐢𝐭 𝐟𝐨𝐫 𝐦𝐚𝐫𝐤𝐞𝐭 𝐜𝐨𝐫𝐫𝐞𝐜𝐭𝐢𝐨𝐧 𝐢𝐬 𝐚𝐥𝐰𝐚𝐲𝐬 𝐝𝐞𝐩𝐫𝐞𝐬𝐬𝐢𝐧𝐠𝐥𝐲 𝐥𝐨𝐧𝐠!

Any day now, the market will drop again and investors will buy the dip, some with leverage even. But the market won’t recover the next day, or the day after. Then stop losses will hit.

There is very high anxiety in the market and everyone believes that a correction is over due, so everyone is holding cash ready to buy the dip. This prevents the market from a full blown correction. The more often this happens, the more people feel confident in buying the dip.

Any day now, the market will drop again and investors will buy the dip, some with leverage even. But the market won’t recover the next day, or the day after. Then stop losses will get hit, which will further make things worse until you see a full blown crash. This will happen without warning, and it will all seem too obvious in hindsight.

I am not trying to scare you, it is not in my interest to scare away copiers. But I am not here to tell you what you want to hear either. Over the past weeks, I have seen copiers leave despite being profitable from copying me. A few have even reached out, expressing their anxiety and decision to get out of the market in the fear of an impending crash.

I am not going to try to minimize your anxiety either, instead I am going to tell you how you should deal with it.

Skin in the game

Aside from $145k of my own money, I have a lot more to lose in the face of a market crash. Among my copiers are family members and close friends. I have gained a lot of respect from my copiers and my pride is at stake too. So I am taking this very seriously.

I have been ever more diligent in securing profits and managing risks, while maintaining a lead on the $SPX500 . I am trying hard to avoid FOMO and not expose my portfolio to specific risks, even if it means that my stats don’t look as good as some of my fellow PIs.

What should you do?

I would not recommend completely getting out of the market.

“𝑀𝑜𝑟𝑒 𝑚𝑜𝑛𝑒𝑦 ℎ𝑎𝑠 𝑏𝑒𝑒𝑛 𝑙𝑜𝑠𝑡 𝑤𝑎𝑖𝑡𝑖𝑛𝑔 𝑓𝑜𝑟 𝑐𝑜𝑟𝑟𝑒𝑐𝑡𝑖𝑜𝑛𝑠, 𝑡ℎ𝑎𝑛 𝑖𝑛 𝑡ℎ𝑒𝑚.”

If you get out now, the market may continue to rally and you may be tempted to come back in at what might be the worst timing. Instead trust in your common sense and continue to Dollar Cost Average.

However, if you feel that you have too much money invested in the market right now, it may be a good idea to scale back. Here’s a simple formula to decide how much money you should invest in stocks. The first thing you want to do is setup an adequate reserve of funds.

Calculate your annual budget. If you have kids, I’d recommend at least 12 months of reserve. If you are young and flexible, 4-6 months of reserve should be enough. THIS IS CRUCIAL. When the stock market is in a bear phase, usually the economy is not doing good either. Imagine that you lose your job while your investments are at rock bottom. You’d be forced to sell at what could be the worst time to sell.

Once your reserve is setup, only half of the rest of your savings should be going towards risky investments like the stock market. You should be saving the other half to build up enough for down-payments to invest in real-estate.

This could be a topic for another post, but real-estate investment gets a bad rep unnecesarily. This is the easiest and least risky way to leverage your savings and get tax benefits too.

This is exactly how I have setup my finances. My stock investments make around 30% of my net worth. The rest is held in real estate and cash. This is where I thing the balance should sit for most of people.

“But what about my Financial Independence?”

Financial Independence is over-rated or grossly misunderstood.

Financial Independence is not a state where you don’t have to work anymore, rather it is a state where you can decide to do the work you want to do. You can take a break when you want, or you can take the leap and set up your own business if you want.

To achieve financial independence, you also have to learn to live within your means. If you need less, you can achieve financial independence earlier and for most people, they may never achieve financial independence no matter how much money they have.

One thing is certain, there is no shortcut to success. Don’t be fooled by anecdotal evidence and influencers. You may take a risk and get lucky, but if you keep up with this approach, then risk will catch up with you. It is a statistical certainty.

If you win a 100%, you only need to lose 50% to be back at where you started. But if you lose 50%, you’d need to gain 100% to be back where you started!

With patience, discipline and Common Sense however, it is very easy to beat the markets and compound your gains to get to Financial Independence, steadily but surely.