“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.”
These are uncertain times for investors. There’s volatility in the stock market, uncertainty in the housing market, and massive unpredictability in the political arena. Let’s take a look at what’s happening and—most importantly—effective strategies for volatility that will keep you building wealth in any market!
The stock market: 2020 was a volatile year for the stock market. Lockdowns saw the market plummet, then making some recoveries later in the year. Now in 2021, we’ve seen crazy things happen with GameStop, AMC, and other businesses exploding artificially overnight.
“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”
-Burton Malkiel, Asset manager and author of A Random Walk Down Wall Street.
Who knew that Economist Burton Malkiel’s comment would be so prophetic!? Malkiel hypothesized that share prices move completely at random, making stock markets entirely unpredictable. While his statement about blindfolded monkeys and dartboards was a reference to the randomized nature of stocks and not a prescription for stock market success, it was only a matter of time before it was put to the test.
In 1988, the Wall Street Journal ran the first of many Dartboard stock picking contests. WSJ staffers acting as the monkeys, throwing darts at a stock table, while investment experts picked their own stocks. After six months, they compared the results of the two methods, along with stock picks from some of its readers.
The results? In the initial contest, the experts edged out the darts. However, as further “experiments” continued, the experts fared less well against darts thrown by people and, eventually, monkeys.
Money Managers or “Monkey” Managers?
In January 1999, a chimpanzee actress named Raven (the star of Babe, Pig in the City) threw 10 darts at a dartboard of 133 internet related companies. Within six trading days one of her picks was up a whopping 95%! By the year’s end, according to George Fisher, author of The Streetsmart Guide to Overlooked Stocks, Raven’s portfolio of ten randomly-selected stocks had outperformed more than 6,000 internet and technology money managers earning an astonishing 213% return.
Most of us have a basic understanding of how credit and debt works based on our personal experiences. We borrow someone else’s money (the bank’s, the mortgage company’s, a friend’s), then we buy something and repay the lender with interest. That’s the basic formula: whether credit is for a house purchase, a car, or dinner at a restaurant. Whether credit is for a house purchase, a car or dinner at a restaurant, that’s the basic formula.
Likewise, the typical questions asked are as simple as, “Who will lend me the money, and can I afford the payments?”While important considerations, we also think there are equally important questions that people aren’t asking. And right now, the question on many people’s minds is, “What will happen to debt if the dollar inflates?
So let’s talk about debt–good debt, bad debt, inflation, and credit. How do these ideas fit together?
First, take a deep breath. If 2020 has left you feeling “adrift,” you’re not alone. The changing world is a shared experience, one that we can navigate together. We think it’s time for a pep talk—so that you can shift gears and get that forward momentum you’ve been looking for.
Within every challenge, there is an opportunity—so it’s time to start seeking opportunities! If you’ve been looking for a sign to do things differently, this is it. Below, we offer three steps to move boldly into 2021.
“Love is a many splendored thing,” and many faces it does have. Love is an infinite pool from which we can draw—romantic, or brotherly, sisterly, paternal, even friendly. There is no end to the love we express, and ways in which we express it. Love is our legacy, to pass down from parent to child or mentor to mentee. This legacy we leave is the best of us—our own infinite stores of knowledge, of experience, of the lessons we’ve learned.
When the world feels like it’s out of our control, it’s time to look inward. In fact, our first “Principle of Prosperity” is to THINK with a prosperous mindset. (If you want to learn all 7 of our Principles of Prosperity, download our Prosperity Accelerator Pack.) Because no matter what is happening in the world at large, a change of mindset is the most powerful strategy. To THINK is about more than financial strategies (though those are important). The principle also refers to our thoughts around money, and our thoughts about the world.
In a “post-2020” world, mindset is what propels us forward, pulls us out of tough scenarios, and creates lasting changes for the better. As Strategic Coach so aptly describes, adversity is an opportunity to develop the “muscles” of our minds.
In other words, challenges are actually an opportunity: an opportunity to become better, more resilient human beings. Never believe that all you can do is survive. It’s time to take a more creative and, more importantly, optimistic approach to life and personal finance. Be a leader in your own life.
Disruptive technology has come to the financial world. Bitcoin and other digital currencies are reshaping how we think about money. As Peter Diamandis observes, cryptocurrencies are making money “more digitized, dematerialized, and democratized than ever before.”
Bitcoin also provides a way for people to remove “money” from the hands of the bankers. Why should banks, Wall Street, and the Federal Reserve have so much economic and financial control, anyway?
In this article, we’ll explore disruptive technologies and how they impact industries and cultures. We’ll offer some observations and share some more from Peter Diamandis, too. And finally, we have a fascinating “life insurance” connection. (Do you know which life insurance company is buying Bitcoin?)
This website is provided for informational purposes only. The information contained herein should not be construed as the provision of personalized investment advice. Information contained herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security or investment. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future.
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