People panic by nature - never be fully invested, otherwise you will miss golden opportunities!

Back on April 10th (just over 2 months ago) I made some predictions with regard what I expected was going to happen to world economies and the stock markets.

Even I, a novice with regard stock investing, could see the writting on the wall.

Well, last week the US markets took a dive on the Friday. Last night, they took another major dive and the US market is no longer in a "correction", but has now been classed as a "bear" market - meaning that they are in a severe downward trend.

However, not only are we now in a bear market with regard stocks, but since my post on April 10th, inflation is surging, interest rates have increased and there are are more interest rate hikes to come. As a result, the property market has cooled off and houses are not selling anywhere near as fast as they did. In fact, prices are starting to come down - eventually there will be new property owners that will have almost no equity in their property because the property will be worth less than they paid for it. There will be much pain to come yet.

History is repeating itself, and there will be those that will lose substantial wealth, and a few that stand to make substantial gains when the dust settles.

In the USA, there are some former high-flying tech stocks that have lost between 60-90% of their value. These were "growth stocks" that were running at a loss and investors were invested in them hoping for growth. These were not the sort of companies I chose to invest in. I am by no means a great stock picker or smarter than anyone else, it's just that I have been in business, and if the business runs at a loss year after year, eventually, it's cash runs out - and then what?

I have mentioned, in past posts of mine, that if you want to learn how to do something, it is easier and smarter to copy someone that you believe is successful at what you want to achieve. Sure, you can go it alone and make your own (possibly costly) mistakes by trying things adhoc or by following the masses.

Let's face it, if everyone is doing the same thing, then it's likely wrong.

People look for safety in numbers - so "if everyone is doing it, then it must be right" is the mentality of the mediocre.

Personally, I would rather walk alone in a direction I believe is right, than walk with the masses in the wrong direction.

The equity investment theme of the last couple of years has been to chase potential growth companies, ones that show promise of great future returns. The fact that these companies are burning cash and not making a profit seemed to be inconsequential.

Sure, there are some great growth companies out there that will do extremely well over time, but nobody can predict who these will be. If that was possible to pick the future winners from the futrure losers, then there would never have been a dot-com bubble and the huge losses that followed the crash in the early 2000's.

So, as a novice, I chose to invest in companies that I knew, whose business and markets I understood, and were actually making a profit. Afterall, isn't that what Warren Buffet does?

Warren Buffet is a multibillionaire investor, he didn't become wealthy because he is an idiot, the man knows what he is doing..... so I just tried adopting his thinking.

Warren Buffet has been cashed up for a few years, waiting for the moment where he can buy good quality companies cheaply - everyone with interest in equities/stocks knew this.

It's just that very few people have the same patience and faith in themselves as Mr Buffet.

I'm still working on this skill set, but rather that assuming I know everything, I just emulate one of the greats.

I accept that I am lacking in experience in the area of equities/stocks. As a result, I subscribe to a number of newsletters and I spend thousands each year for independent information so I can give myself the best opportunity to make the most informed decisions. Spending a few thousand dollars is nothing in comparison to the money I have made, and the money I have avoided losing in the market. As per a previous post of mine, I continually invest in my education. I have also read many of the Buffett Letters as I think they contain many lessons.

I expect that after the dust settles, there will be many good quality stocks that will have been oversold and available quite cheaply. As such, those that are cashed-up will be able to take advantage of this situation and be able to buy low and ride the market up to it's new high over the next few years.

Of course, those that are fully invested with no spare cash, will just have to sit and watch their wealth drop, and again sit, watch and wait for their wealth to return over the coming years. However, in the meantime, they will have much worry and panic going through their heads.

The ones that will suffer the most are the retirees that rely on the income from their retirement funds to fund their lifestyle. These people generally hold minimal cash and rely on their superannuation or retirement fund, which is managed by a fund manager on their behalf. These retirees are generally fully invested and have minimal cash available to take advantage of the market downturn. What's worse is that their retirement funds are tied up with the fund managers and the only option they have is to sit on the side-lines and watch it all unfold in front of them. I know a few people in this current situation, and I feel for them.

However, we make our own choices in life, and if you don't want to learn how to handle your own money, then you are left at the mercy of someone else's judgement - hopefully they get it more right than wrong.

We self manage our retirement funds. I can sell and buy at my discretion and do not need to sit on the side-lines with my hands tied hoping the fund manager handles MY money properly. Doing things this way, we can take advantage of the information we subscribe to and because we have developed a good degree of financial education, we started reallocating funds starting back in Q4 2021. We were aware that inflation was going to start, we are expecting a recession later in 2022 and we targeted equities that actually go up during inflationary periods.

If you are reading this, try to understand what is happening and why.

Many things have lead to this moment including, but not limited to:

• Greed

• Lack of financial education of investors

• Investors NOT looking at, or trying to understand, financial history

• Governments world-wide printing money and artificially stimulating the economy

• Goverments spending too much.

• Near zero interest rates

• People juming into property, stocks etc without taking into account that situations, markets and the economy can and do change over time.

This will be an exercise in losing money for many people.

The question though is, will they learn from this and become smarter and stronger so they can do better in the fuure, or will they just become a victim of circumstances?

I fear it will be the latter.

History really does repeat itself.

The rest of 2022 will be an interesting time.