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Ways To Keep Your Investments Secure When The Stock Market Is Tanking

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Ways To Keep Your Investments Secure When The Stock Market Is Tanking

When the stock market plummets, it is our immediate reaction to panic.

We put our hard-earned money into our investments, and before our eyes, we are watching its value decline.

However, the best course of action is to clamp down on these high, understandable emotions, wait for a few hours, then move on to make logical decisions.

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image credit to fool.com

After all, the stock market is always fluctuating.

It is simply an inevitable, unavoidable aspect of the investment world.

Just take a look at how much the stock exchange trends shifted over the course of only the past few years:

Even more, economists are currently predicting a massive stock market crash upcoming in 2016.

Some are stating that current U.S. stocks are overvalued by as much as 80%.

Many fear that investors are walking into a similar trap as they did in 2007.

James Dale Davidson, who predicted the famous stock crashes of 2007 and 1999, is predicting a similar crash.

This should indicate to investors that there is likely an economic storm on the horizon.

With all these apocalyptic economic forecasts being broadcast, here are a few things NOT to do in the case of a massive market downturn.

Panic
Plain and simple: don’t panic.

This leads to emotional investment decisions and pulling out funds when it can be more damaging than helpful.

This is easier said than done, however.

Don’t obsessively check on the value of your portfolio.

Don’t immediately sell off all your investments: this way, you are guaranteeing a loss for yourself!

Being Unprepared For Loss 

Remember from the beginning of your investment career that there WILL be losses.

There are plenty of online simulators where you can manage imaginary money in the market, and experience the negative feelings of loss, before it happens in real life.

Be ready for the worst and strategize in advance.

Strategically make investments in multiple sectors to limit your losses.

Even though risk reduction may lead to return reduction, it is ultimately up to the investor to decide how much of this tradeoff he or she is willing to make.

Try to invest in derivatives or real estate to hedge against losses.

Understand how the market works, know your personal tolerance for risk, and prepare for the loss in advance.

Live In A Fantasy World

However, if a crash is indeed coming, and very predictable, you have to cut your losses.

It is plain idiocy to pretend like a stock crash isn’t coming when it clearly is.

In America, it is a year full of hectic elections and escalating violence.

It is inevitable that global investors doubt us.

It is wise to sell off at least some of your highest valued stocks while you are still in the green.

This way, you can avoid loss later down the line.

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Fail To Understand Market Trends

Remember that over time; market values have climbed, even though widespread worry and fear would have suggested otherwise.

If you can stay ahead of the curve, remember that fluctuations happen, and brace yourself for upcoming change, you will experience far less mental and financial strife.

As they say, there are “bear” and “bull” markets, when values are respectively decreasing and increasing.

The switch always occurs every few years.

It is very normal for the stock exchange to have down years and no reason to panic.

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DON’T FORGET ABOUT DCA

For long-term investors, dollar cost averaging is one of the safest bets.

Some benefits include:

  • Buying shares at low price while the market is already declining in value overall
  • You purchase shares regardless of their current market value
  • In the long run, your average buying cost will “average down.”
  • Your overall share entry price will always improve over time

Try To Be A Bull

One of the best things you can do in a bear market is playing dead.

Don’t try to be a bully.

Don’t make any sudden, unpredictable moves, just like if you saw a bear in real life.

Put more of your shares in stable investments like the money market or treasury bills (things with short maturity and high liquidity).

Put All Your Eggs In One Basket

Diversifying is an absolute must.

You keep yourself secure by making sure if one market tanks, you have many others to back you up and keep you financially stable and flexible.

With diversity, you can bounce back.

Without it, you have nothing left to reinvest and have to start from scratch.

Invest More Than You Can Lose 

This seems obvious, but enough people do it that it is worth mentioning.

If you can’t afford to lose it, don’t invest it.

You should always come at investment from the mindset of “what would happen if I lost this” instead of “what could I gain if this goes well.”

We are biased to think that we make good decisions, but as with everything, there is a balance to be struck between confidence and security.

Don’t get involved with equities, except if you have a very clear investment horizon.

Markets can be very destructive, but it is easy to forget that.

Miss Low Cost Opportunities 

Stop worrying about what you are losing in a bear market and think about what you could gain.

Famous investor Warren Buffett invests in low-cost stocks when the market is flat, so that when it springs back he makes an enormous increase.

This is an excellent strategy when the market is declining, especially if you see a lot of potential value in a future stock.

It is easy to get caught up in the declining value of your current stocks, but don’t.

You can use this as a chance to diversify your holdings.

Some other useful strategies include:

  • Putting your holdings in defensive industries, or non-cyclical stocks, like shaving cream or other things which are a steady value
  • Inverse ETFs can give you an opportunity to profit from the decline of index funds when the market is failing
  • Doing nothing: sometimes it is better to wait for the stock market to bounce back than to make any moves at all.

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Business

Gold ‘Frenzy’ To Build Around Election, Platinum Could Soar 50% By Year-End

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Gold ‘Frenzy’ To Build Around Election, Platinum Could Soar 50% By Year End

Peter Hug, head of the precious metal division at Kitco, believes the Fed’s decision to hold interest rates at near-zero through at least 2023 is bullish for precious metals and particularly gold. He also mentioned the road platinum can head to by the year’s end.

“About three Fed meetings ago they indicated they would hold rates at pretty much zero through the end of 2021 into early ‘22, today they’ve extended that by an additional year, there have been some analysts that are suspecting they will keep rates at zero right through 2024, so we’ve got another almost four years of zero interest rates to look forward to,” said Hug.

“The Fed being a bit more accommodative on inflation indicates to me that it’s a very positive environment for hard assets in general but I think the metals as well will continue to move higher over the next period of time based on the dovishness of the Fed, global central banks and the uncertainty of the US election coming up in about six weeks.”

The State of the Gold and Silver Markets

Hug said the current consolidation phase is a great sign of the overall health of the gold and silver markets. This comes after the frenzy in the gold and silver markets about a month ago.

“The market has been consolidating, which is a very good sign, especially for gold. Gold has been consolidating between our support level of 1925 and 1975 for the better part of two weeks. Silver seems to be between $26.50 – $27.50 range and consolidating as well. The fact that people are not selling into a market that is as frenetic as it was a month or six weeks ago, indicates to me that this market is setting up for the next leg higher once we get through this consolidation phase.”

Availability and Premiums

The gold and silver markets are taking a bit of a breather and the mania has slowed a bit. With this, Hug said the availability of gold and silver coins is getting better. He said premiums are coming down as well.

“On the gold and silver side, dealers are starting to show inventory. That’s not a result of increased production, it’s more a result because of this consolidation phase, retail investors have started to pull back on the markets so there’s not as much buying frenzy in the physical space right now, I think that changes if gold gets north of $2,000 again. But this consolidation of $50 range in gold and the $1, $1.50 range in silver has basically dried up the demand at these levels.”

“So production is still coming on board and dealers are starting to build inventory. And because of that you are seeing premiums come down. Silver maple leafs you can get, again, depending on quantity, somewhere between $5-6 over spot, Eagles are down somewhere between $5-7 over spot, so you are starting to see as this market stays sideways and we don’t see another rush into the buying side from the retail investor, you give it another 2-4 weeks and I think there will be reasonable inventory on the market and premiums should come down.”

Volatility to Return Soon?

Hug said that if you are looking to acquire gold and silver coins, you shouldn’t wait long as we could see volatility return very soon.

“I caution that past October 15 the market is going to be very volatile as we go into the election.”

Other than gold or silver, Hug sees a huge opportunity in the platinum space. There, he expects prices to climb 50% by the end of the year.

“I’m constructive platinum. It is also consolidating in the $900-950 range, but I do anticipate platinum to be north of $1000 and then look to $1200 possibly $1400 before year end.”

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Dalio: Capitalism Needs Fixing, US Dollar Upended In Next 5 Years

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Dalio: Capitalism Needs Fixing, US Dollar Upended In Next 5 Years

In a recent interview with MarketWatch, Ray Dalio, the billionaire founder of Bridgewater Associates, covered a wide range of topics. These include his thoughts on capitalism, China, the US dollar as the world reserve currency, and much more.

Three Problems

Dalio says the US is facing three distinct problems and is losing ground to China in many ways.

“There are three problems that are coming together,” said Dalio. “So it’s important to understand them individually and how they collectively make a bigger problem,” said Dalio.

“There is a money and credit cycle problem, a wealth and values gap problem, and an emerging great power challenging the existing dominant power problem. What’s going on is an economic downturn together with a large wealth gap and the rising power of China challenging the existing power of the United States.”

“It’s a fact that there has been a weakening of the competitive advantages of the United States over the last couple of decades. For example, the United States lost a lot of the education advantage relative to other countries, our share of world GDP is reduced, the wealth gap has increased which has contributed to our political and social polarization.”

Challenges the U.S. Face

To illustrate the challenges that the US faces as it attempts to stay ahead of China and remain a world power, Dalio says we need to look at Britain and how they eventually lost their position as the world’s reserve currency.

“If you look at British history, the development of rival countries led them to lose their competitive advantages. Their finances were bad because they had accumulated a lot of debt. So, after World War II those trends went against them. Then they had the Suez Canal incident and they were no longer a world power and the British pound is no longer a reserve currency. These diseases almost always play out the same way.”

“The United States’ relative position in the world, which was dominant in almost all these categories at the beginning of this world order in 1945, has declined and is exhibiting real signs that should raise worries. There’s a lot of baggage. The U.S. has a lot of debt, which is adding to the hurdles that typically drag an economy down, so in order to succeed, you have to do a pretty big debt restructuring. History shows what kind of a challenge that is.”

“The United States is a 75-year-old empire and it is exhibiting signs of decline. If you want to extend your life, there are clear things you can do, but it means doing things that you don’t want to do.”

Capitalism Needs Improvements

Dalio is a capitalist (he didn’t become a billionaire through handouts). However, he does acknowledge that the system needs to be improved so that everyone has a chance at financial freedom.

“What has been shown is that capitalism is a fabulous way of creating incentives and innovation and of allocating resources to create productivity. All successful countries have uses for it. For example, communist China has chosen capitalism, which has been essential to its growth.

“But capitalism also produces large wealth gaps that produce opportunity gaps, which threaten the system in the ways we are seeing now.

“We have to be in this together. The system needs to be reengineered to do this. But if we don’t do this engineering well, we’re going to spend in an unlimited way and deal with that by creating debt that won’t ever be paid back, and we will risk losing the reserve currency status of the dollar. If we get into that position — and we’re very close — things will get much worse because we are living on borrowed money that’s financing our consumption.”

On Dollar as the World Reserve Currency

Dalio says we could see the US lose reserve currency status as soon as the next five years.

“Within the next five years you could see a situation in which foreigners who have been lending money to the United States won’t want to, and the dollar would not be as readily accepted for making purchases in the world as it is now.”

“The United States doesn’t have a good income statement and balance sheet in dealing with the rest of the world. It is running a deficit to the rest of the world that is financed by borrowing money so that we are producing liabilities.”

There is uncertainty in the markets ahead of the November election. With this, Dalio says there are two steps investors can take to protect their wealth.

“First, worry as much about the value of your money as you worry about the value of your investments. The printing of money and the debt should make you aware of that. That’s why financial asset prices have gone up — stocks, gold — because of the debt and money creation. You don’t want to own the thing you think is safest — cash.”

“Second, know how to diversify well. That includes diversification of countries, currencies and assets, because wealth is not so much destroyed as it shifts. When something goes down, something else is going up so you have to look at all things on a relative basis. Diversify well and worry about the value of cash.”

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Business

US Billionaires Got Richer During Pandemic by $845 Billion

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US Billionaires-featured

US billionaires got richer during the pandemic by a tune of $845 billion. This represents a 29% increase from the time the Covid-19 lockdowns started until now. While the stock market crashed during the early days of the pandemic, it has since recovered. Along with recovery are net worth increases for America’s billionaire. Among the pandemic’s big winners of 2020 were Jeff Bezos, Elon Musk, and Mark Zuckerberg. Also in the list were investor Warren Buffett, Oracle CEO Larry Ellison, and ex-NY Mayor Michael Bloomberg.

RELATED: Jeff Bezos Is Now Worth $200 Billion

In a report released Thursday, the Institute for Policy Studies and the Americans for Tax Fairness (ATF) said the total net worth of 643 of the nation’s richest people rose from $2.95 trillion to $3.8 trillion.  

This is equal to a 29% increase between March to September. The report based the numbers on Forbes’ annual billionaire’s report and real-time data. 

Big Winners

Jeff Bezos, the founder, and CEO online retail giant Amazon is now the world’s richest man. The pandemic forced people indoors and played right into Amazon’s online strategy. As millions switched to online shopping, demand for Amazon’s services skyrocketed. Amazon shares zoomed along with 40% in 2020, as the company racked up billions in orders. People bought groceries, medicine, household products, and entertainment items on Amazon’s sites. As the company grew richer, so did its CEO and majority stockholder. On August 19, as stock prices of Amazon went up, his net worth exceeded $200 billion. As of September, Amazon stock has fluctuated and Bezos’ current worth is $184 billion. 

Another rich guy that got even richer was Tesla’s founder and CEO Elon Musk. Tesla’s value grew five times its January price. By August, the company’s stock split pushed his personal shares to $104 billion. This allowed him to join the coveted centibillionaire club. Compared to his March net worth of $24.6 billion, he’s now over four times that. As of September, with Tesla dropping value, Musk’s worth has dropped as well to $88 billion. 

Facebook’s Mark Zuckerberg, who was worth $107.6 billion in August (now down to $93.7 billion). Facebook stock rose from $209 in Jan to $303 in August, making his 13% stake worth over $100 billion. Like Musk, he also joined the centibillionaire club this year. 

“COVID crisis supercharges inequalities”

Chuck Collins, director of the Institute for Policy Studies’ Program on Inequality, and co-author of the report said he was somewhat shocked by the figures. He added that the COVID crisis is “supercharging America’s existing inequalities.” He said, “I would have thought maybe six months into this that things would have shaken out – that everybody would take a hit.” 

“The difference is stark between profits for billionaires and the widespread economic misery in our nation. It sort of dramatizes the unequal sacrifice and profiteering element of the wealth accumulation at the top.”

Meanwhile, Covid-19 infected 6 million Americans and killed more than 200,000. As businesses collapse, the economy outside of Wall Street is in recession. More than 50 million jobs vanished in the pandemic. At present, 14 million Americans remain unemployed. Even those lucky enough to still have jobs got hit. Average work income fell by 4.4.%, per Bureau of Labor Statistics data. Outbreaks are still prevalent, even as a vaccine remains under development. 

As such, the economy’s reopening remains slow. 

Even local governments are feeling the pressure. States and cities are hamstrung with crippling deficits. California declared a $54 billion deficit, while New York City is looking at a $9 billion loss in revenue. From now until 2022, state budgets face a $555 billion deficit. This is according to the Center on Budget and Policy Priorities.

COVID-19’s unique effect made those with better plans during the pandemic fares better than most. In the case of Amazon, people flocked to their site when going out posed safety issues. For the others, the rise in stock reflected more on how they handled their business during the crisis. Some people are just quicker to seize on opportunities, even those coming from a crisis.

Watch this as Bloomberg reported last July 2020 on how billionaires got $637 billion richer during the pandemic:

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Should we begrudge the rich getting richer, especially at a time like this? Do they deserve this success? Let us know what you think by leaving your thoughts on the comment section below.

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