Are We at the Top of the Market? How to NOT Lose Money
After seeing an upward trend in the markets over the past decade, you may be concerned that we’re at the top of the market cycle. Many people are feeling the volatility and uncertainty. How do economic factors direct your decision-making? Should you stay in for the long haul and ride it out?
In today’s show, we address these concerns and show you how to not lose sleep and not lose money.
You’ll stop feeling the impending sense of crisis and be able to focus on building your wealth goals, regardless of the market, instead.
Table of contents
Where Does Investing Fit into the Cash Flow System?
We’ve developed the 3-step Business Owner’s Cash Flow System as your roadmap to go from just surviving, to a life of significance, purpose, and financial freedom. The first stage is the foundation. You first keep more of the money you make by fixing money leaks, becoming more efficient and profitable. Then, you protect your money with insurance and legal protection and Privatized Banking. Finally, you put your money to work, increasing your income with cash-flowing assets.
Investing is part of stage 3. It’s here that you select an investing strategy that puts you in control.
Just as there are healthy cycles in biology and farming, the market follows a cyclical pattern.
Wyckoff theory describes the four phases of the market cycle as accumulation, mark-up, distribution, and decline.
To profit, you would want to buy during the mark-up and sell at distribution. But that requires an intimate understanding to be able to predict exactly where where we are in the cycle.
You would also do well to understand the Austrian business cycle and how it impacts access to capital.
Current Market Environment
We’re now seeing all-time highs from a decade-long bull market, along with volatility.
Today, the S&P 500 trades at a cyclically adjusted price-to-earnings ratio (CAPE) of 31.2. There are only two times in history that the CAPE has been materially higher: the 1920s market bubble and the 1990s market bubble – both of which preceded not just stock market corrections, but full-blown bear markets.https://www.kiplinger.com/article/investing/T052-C008-S001-is-a-stock-market-correction-in-the-cards.html
“Stocks are expensive by virtually any metric you want to use,” says John del Vecchio, noted short seller and co-manager of the AdvisorShares Ranger Equity Bear ETF (HDGE). “The price-to-sales ratio for the S&P 500 is higher today than during the 1990s dot-com mania. Price-to-book ratio, dividend yield, Tobin’s Q … Pick any of these broad market metrics, and they’ll tell you the same story. Stocks are priced to deliver lousy returns over the next decade.”https://www.kiplinger.com/article/investing/T052-C008-S001-is-a-stock-market-correction-in-the-cards.html
This CNBC article gives a good synopsis of the market and economic factors underlying the current volatility.
Who knows for sure?
While there’s no way to predict what the market will do in an exact future timeframe, the highs are usually followed by lows.
… the stock market will continue to be essentially what it always was in the past, a place where a big bull market is inevitably followed by a big bear market. For every “bull market” there MUST be a “bear market.”Ben Graham, father of the investment management profession, in 1959
A possible sign of the times, one of the strongest performing stocks of all time, General Electric, froze their pension in early October 2019.
“Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception,” said Chief Human Resources Officer Kevin Cox. “We carefully weighed market trends and our strategic priority to improve our financial position with the impact to our employees.”https://www.marketwatch.com/story/ge-freezing-pensions-for-20000-employees-2019-10-07
No matter how you slice it, a correction could mean the devastation of wealth.
How to Not Lose Money
With this in mind, it’s important to determine whether market gains are helping you achieve financial freedom. That’s because average returns are not the same as the real rate of return.
There is no difference between a 100% gain and a 50% loss. Understanding that investment returns are driven by actual dollar losses, and not percentages, is important in the comprehension of how devastating corrections can be on your financial outcome. So, before sticking your head in the sand and ignoring market risk based on an article touting “long-term investing always wins,” there is a huge difference between just making money and actually reaching your financial goals.https://seekingalpha.com/article/4233132-understanding-market-cycles
You don’t have to be concerned, worried, or even watch the market.
That’s because you don’t have to participate in the market. You don’t have to passively invest, stay in for the long haul, and cringe when the bottom falls out.
Maximize Safety and Guarantees
Instead, you can store cash with safety and guarantees, and then invest actively and strategically in what you know and control.
There are times when a little extra caution is warranted and when it might make sense to hold a little more cash than usual. When you see relatively limited upside in the immediate future, that’s the prudent move.
“Never forget that cash is a position too,” writes J.C. Parets, founder of technical analysis research firm All Star Charts. “Don’t let anyone tell you that heavy cash positions are a bad idea. It’s your cash. You earned it. If you want to raise cash during more volatile environments, I think it’s way better than getting chopped up, or worse, closing your eyes and hoping the big bad market goes away.”https://www.kiplinger.com/article/investing/T052-C008-S001-is-a-stock-market-correction-in-the-cards.html
One of the best places to store cash is in Specially Designed Whole Life Insurance, where you have safety, competitive tax-free growth, and guaranteed accessibility. Whole life insurance is an uncorrelated asset that doesn’t fluctuate with market volatility.
Alternative investments like real estate, oil and gas, and mortgage notes are also not correlated with the stock market. They provide an excellent opportunity to generate income returns but avoid market risk.
Start Creating Time and Money Freedom Today
You’ll find out the one thing that you need to be doing right now to accelerate your path to financial freedom.
Success leaves clues. Model the successful few, not the crowd, and build a life and business you love.
Would you like to make better investment decisions? Today, we’re talking with Kent Ritter, full-time real estate investor and operator of Hudson Investing about scaling and diversifying your real estate portfolio. So if you want to expand your investing perspective… tune in now! How Kent Ritter Got Started In 2010, Kent started as a partner…Read More
Are you frustrated with the volatility, fee structure, and abstract nature of most investments? Do you feel that you’ve outgrown the status quo investing strategy and want to play a bigger game with your investing? Have you heard of alternative investments, but don’t know where to get started? Do you need investments that are built…Read More