It’s no secret. The stock market is down. There is volatility all over the place. There’s Russia/Ukraine beef, Covid restrictions still in play, interest rates likely to rise, and overvalued stocks. The S&P 500 just hit correction territory and people always freak out when this happens. I’m here to ease some nerves, highlight how you can benefit from this, and get you back on top. I’m not a financial advisor by any means. But I have been in the market for some time and have built up a system that works for me. I don’t day trade. Let’s get that out of the way. Day trading is for suckers who don’t have any meaningful work to keep them busy creating something great. No. Instead, I look at long term ebbs and flows. For example, if the market dropped 5% in one day, I sit on my hands and watch. Now, if the market is down 20% over weeks or months, then I’ll start to rearrange some holdings.
Volatility happens in the market. This is the most difficult thing to learn how to deal with. And that’s all we can do with it. Just deal with it. Because we can’t control it and no one knows what’s going to happen in the coming months, weeks, or even days. That’s why a long-term strategy is the best path to financial success in the market. An all-in strategy will only burn you. Sure, you may get lucky once, but even this is bad because it trains your brain to think you did the right thing. When in reality, you really just got lucky. Conditioning your brain in this way will only lead you to do it again and you most likely won’t be so lucky the next time. As an alternative, we want to take baby steps over a longer period of time. Never going all in. Why? Because if you go all in, and the market continues to go down, you have nothing left to play with. And we never want to get to that point.
Here’s the basic strategy. Unless you’re a professional financial analyst or trader, you have no idea what makes a good stock and what makes a bad stock. For the average Joe who is doing this as another form of income (not their sole income) there are much safer ways to maneuver the markets. So, here’s what we want to do. Invest into low expense ETFs. My favorite is SPYG. This ETF is low cost (ETFs are actively managed and require a cost to invest. Some are expensive that promise great gains although risky, while some are basic and less complex like SPYG that basically just follows the market) which is comprised of the S&P 500, but with a little more weight on the tech side. And with tech soaring over the past decade or so, this is a great sweet spot to be in. Step 1 is to budget. Figure out an amount to invest on a weekly basis that won’t stretch you too thin. Once you have that planned out, invest it in SPYG on a weekly basis. That’s basically it for now. There have been times that I’ve gotten too cute in the market and have gotten burned, only to realize if I just invested in SPYG then my gains would be much greater. Don’t get cute in the market. You’ll either get lucky then lose later, or just plain lose. Instead, use this boring strategy that is as close to a sure thing as you can get. Every ETF and mutual fund out there compares it’s yearly performance against the S&P 500. Only about 10% of those actually beat the S&P 500’s performance. So, what does this tell us? That most of the ETFs and mutual funds are bogus. Fund managers try and get cute by creating hundreds of mutual funds, only to get lucky very rarely, then boast about how they knew what they were doing the whole time. Take my advice and be boring in the market. Use SPYG as your old faithful and go from there. Put a little in each week and you’ll be happy in a couple years that you did.
Now that you got your foundation in place with investing a little in SPYG on a weekly basis, we can start to add another layer to this strategy. SPYG is your stable rock that won’t let you down. However, it’s smart to diversify and to add more risk at times. When the market is ripping and roaring, we don’t do anything. We simply watch our money grow and grow. When the market is down, like it is right this moment (2/28/22) then we start to play with riskier plays in hopes the market will rebound, which it always does eventually. Again, we never take an all-in strategy, but we will start to play with riskier stocks and ETFs while they are down to get them at a discount. I still don’t like investing in individual stocks, but I don’t follow or research companies. If you were ever interested in picking individual stocks to gamble on, now is the time to do it when we are in a correction. It’s wise to stick to the large blue-chip stocks like Apple, Amazon, Microsoft, and other companies that are in this vein. If you’re having trouble deciding, why not just pick an ETF like what I do. One of my favorite riskier ETFs to invest in when the market is down is TQQQ. This is a triple leveraged ETF that follows the Nasdaq. In other words, if the Nasdaq gains 1% then TQQQ would gain 3%. If the Nasdaq loses 1%, then TQQQ would lose 3%. You get the idea. This ETF is extremely risky and should only come out of your playbook when the market is down like it is right now. Again, never take an all-in strategy, but I do recommend adding a little capital to TQQQ while the market is down to get it at the discount it’s at. Similarly to SPYG where we invest a little every week, we’re going to do the same with TQQQ. However, only invest a quarter of what you normally would invest into TQQQ. If you invest $200 on a weekly basis into SPYG, only invest $50 into TQQQ on a weekly basis. And don’t start investing in TQQQ until the Nasdaq or S&P 500 is in correctional territory, meaning if they are 10% or more off from their all-time highs. TQQQ is a short-term strategy and only to be used when the market is down. When the market goes back up, which could be 1 week, 1 month, or 6 months, then it’s time to sell. But don’t sell until the market is back close to it’s all-time highs. All markets go up eventually, so you just have to be patient and resilient while we wait for the market to rebound. When the market is up again, sell all your TQQQ and put it into SPYG.
This strategy works. In its simplest form, it makes slow and consistent gains when the market is soaring, while playing in riskier stocks while the market is down, hoping to capitalize on the rebound. Low and slow is the name of the game here. Never go all in. Always dollar cost average, which is investing a little consistently over time. This has been proven to be the best strategy for growing your portfolio in the long run. Be patient. Be resilient. And build your portfolio to new heights.