The Illusion of Losing Money (Ft. Steve - Millionaire Habits)
Why you don't actually lose money when the market is falling
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Weekly Market Update 🗒️💡
The TSX fell last week by 2.1% for the week while the S&P closed higher by 0.3% on Friday. Oil prices rose this past week however still down year to date at -9.3% ($/bbl).
What is going on with NVIDIA?
Shares of the tech giant rose this past week skyrocketing 27% after the company destroyed analyst expectations, making it the 5th most valuable company in the US.
NVIDIA shares were worth $305 apiece on Wednesday, enough to value the company at more than $750 million USD.
On Thursday morning they topped $400, enough to value the company at more than $1 trillion USD.
Crazy.
Prior to last week, only 4 American companies managed to make it to this exclusive club: Apple, Microsoft, Alphabet, and Amazon.
Meta and Tesla have also reached this milestone, but both companies have seen their share prices fall since.
NVIDIA CEO Jensen Huang mentions the company is on track to do $35 billion USD in revenue next year.
Is this tech giant worth having in your portfolio? Maybe, if you like stocks trading at 200x earnings.
Tweet of the Week
This week’s guest writer is Steve Adcock (Millionaire Habits).
Let’s hear a few introductory words from Steve himself.
Hey everyone I'm Steve! I retired from full-time work at 35 after achieving financial independence. Today, I write about how to steal the simple habits of millionaires on Twitter and on my rapidly-growing newsletter, Millionaire Habits.
Are you tired of worrying about money? Guess what? You might be closer to financial independence than you think.
Check out my newsletter of 16,000+ here and follow me on Twitter here
Without further ado, here is Steve on “The Illusion of Losing Money”…
Nobody loses money in a bear market.
Okay, let me tweak that statement just a bit:
Nobody who doesn't panic sell loses money in a bear market.
There, that's better.
Consider this: Most bear markets (a bear market is when prices fall by at least 20% from their highs) last around 9 to 10 months, from start to finish.
That's it.
That means if you're willing to ride out a bear market for less than a year, your money will likely continue to build once the market inevitably rebounds.
To prove that I'm not just blowing smoke out of my backside, I'll show you why losing money in a bear market is a myth.
Why Bear Markets Build Wealthy Investors
Here's the truth (and I'll bold it for emphasis):
You won't lose money if you don't panic-sell during bear markets.
That's just the way it is.
Why? Because if you sell a stock at its lows, you no longer own that asset. That means when the asset goes back up (and it likely will!), you won't enjoy a piece of that money-flavored pie because you chose to sell that asset when the market was down.
Remember, it’s buy low, sell high. That’s how investors make money in the market.
Not the other way around.
This is the difference between long-term and short-term investors. It’s been proven more times than Tom Brady has Superbowl rings that long-term investors are much more successful than short-term active traders. It’s because giving the market enough time to build wealth will do just that. The market builds wealth if you’re in the game for the long haul.
Personal story: Over the last couple of years, the value of our stocks has dropped about $350,000. But here’s the beauty of it: We didn’t lose $350,000.
The value of what we own decreased, but since we didn’t sell a single stock we also haven’t lost a single tangible penny.
We still own those assets.
And when the market picks back up again we will get all that value back, plus some.
Investing in the stock market isn’t rocket science but requires a skill that seems more elusive than mastery of rocket science: Patience.
Play your cards right and you stand to make a LOT of money during bear markets.
The only requirement is patience. It’s fun to invest when the market’s up. Not so fun when it’s down. But like having to stare at the hairy back of the guy two rows in front of you who insists on watching the game with his shirt off, it's all part of it.
There, the investing secret's out.
It’s a beautiful system. All you gotta do is let it work its magic without going crazy.
But if you’re still worried about your cash flow during down markets, there are a few things that you can do (and should have been doing all along).
Here’s what you can do:
Keep a 6-month emergency fund to help you sleep at night.
Don’t touch your investments as much as possible when the market is down.
Ignore the doom-and-gloom predictions because it’s all bullsh*t.
When the market inevitably rebounds, live large.
You exploit the magic of the market essentially by doing nothing more than letting your investments ride in a market that’s historically proven to make people filthy rich.
If you needed more reason to buy and hold, the S&P 500 is higher in the 12 months after a debt-ceiling standoff (premium content)