As a young adult between the ages of 20-30, I really hope that you can take this advice to heart. I really believe that the times we are going through right now, in March 2020, that there will be some opportunities for our generation/age group to win coming up in the near future. Before we win though, we have to know how to win.
Covid-19 or whichever of its ten names you want to call it, is deeply impacting the likes of the world right now. The President of the United States sat down in front of the country last night to talk about it, banned all travel from Europe to the US, the NBA suspended the rest of its season, March Madness is about to be played with no fans in the arenas (tournaments will get cancelled all around in the next day or so).
It is safe to say that the impact of the Coronavirus is very real and starting to hit very hard.
Another area that’s being hit is the stock market. It continues to dip as investors begin to dump what they have and take the cash before prices fall too low.
Some semi good news can be understood using this analogy –
The stock market is like a dog on a leash, and the economy is like the person walking the dog. You’ll see the dog darting back and forth left to right, sniffing everything he can find, while the human is just walking at a controlled pace, in the same general direction, rarely deviating from the path.
Right now is no different than a moment that the dog takes off after a squirrel, and the person walking it has to just grab the leash and pull back in a little bit. The big picture – the human – is still under control. The economy is still under control. Cash is still here, jobs are still here, labor is still here.
But, while the dog is running wild in front of the person, there is money to be made or lost. You can place money in the stock market and hope that it increases in value. Find a company that you believe in, that you use, and that you think has a solid future ahead of them. (There are tons and tons of lists and ways to find the best stocks to buy at any given time. The Motley Fool is a great place, Yahoo! Finance another.)
I am telling you this because in my opinion, we have around a year left of a somewhat crash. I think we will see a small correction after the election – no matter who wins – and then it will slowly dip back down after that. We have probably a year until the market hits the lowest point that it will hit, and at that time, people in our situation, need to be ready to buy.
You have a year to learn as much as you possibly can when it comes to finance, economics, and investing, because there will be a pot of gold opportunity waiting for us there when the market bottoms out.
But why is the market being so low a good thing?
I’m glad you asked. When the market is low, prices are low. We all love a good sale, right? New pair of shoes went from $129 to $89, you’re much more likely to buy them, and you know you are getting something for a great deal.
Stocks are no different! If you know that Company A is a great company and usually worth $40 or $50 a share, but right now is down in the $20’s, you need to see those stocks as if they are on sale.
If every other rational investor sees low priced stocks this way, what will end up happening?
They will all be buying these stocks that are on sale! If everybody is buying, that means the companies and the stocks will become more valuable.
You (and everyone else) bought in while the market was down, and purchased 100 shares at $20 a piece, now they are up to $40. You originally paid $2,000 for something that is worth $4,000. Now, you have the ability to sell those shares and cash out for the $2,000 profit or you can leave it invested or find other places to continue growing.
The options are endless, but they are options that need to be taken advantage of.
Too many people complain about how much they didn’t learn about finance and investing in high school, but don’t ever try to gain more knowledge on it. You have to find this stuff on your own and you have to make this stuff happen on your own. Your high school didn’t owe it to you to teach you this stuff, but I truly believe you owe it to yourself to teach yourself.
I definitely won’t claim to know everything, but I will always be doing my best to learn more. I just want to present the ideas to you and allow you to work on your own to learn more about whatever it is you want to learn about. It’s all out there, go find it and dive in.