How Can a Dropping Market Be a Great Thing?

How can a dropping market be a great thing? The market isn’t good or bad, it’s just up or down. Financial success comes when you build a plan that works regardless of the market.

So it was a rough week for your 401k...

If you had any sort of ear to the ground listening to financial news, or if you happened to pull up your 401k, you probably noticed there was a drop in your account.

When we see a drop in our account, we tend to correlate this to a bad thing happening. That's understandable, but but here's the deal…

The market isn’t good or bad, it's just up or down.

Either one of those, up or down, could be good for you based on how you respond. Success in the market over time means getting away from the mindset that a drop in the market is a bad thing. It means getting away from the mindset that the market going up is a wonderful thing, too.

Many people I work with are doing really well today because of how they responded to a dropping market. A market that was going down wasn't a bad thing for them. Why?

They chose to stay in it, and it was the best thing that's ever happened to them financially.

How Can A dropping Market Be A Great Thing?

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Based on how you respond. It's subjective. It could be terrible for one person and wonderful for another person.

Your response to a down market could be a wonderful thing for you. It could make you money over time, or it could secure your retirement if you treat it in the right way.

An up market could be terrible if you get too complacent and put too much money into equities and stocks. You think everything's going to be fine, and then it crashes. That up market might have destroyed you.

Your success is not about whether the market went down last week or goes up next week. Your success is about the way that you respond to it.

That is the key.

Your 401k dropped last week because the economy looks so good.

Since the cost of bonds was dropping, people started selling them. They think interest rates are going to be going up simply because the economy looks so darn strong.

If you begin making decisions based on a plan that says ‘I'm going to win regardless of whether the market is up or down,’ you will find success. If you make a plan based on if the market is looking “good” or “bad,” you will wear yourself out.

When the market goes down I actually feel a little bit of excitement. Why is that? Because the exact same thing happens every time the market drops:

  • The whole world will run screaming for the hills.

  • All the people that look at the market as being “good” or “bad” will sprint out of the market screaming for their lives when the market drops.

If it drops, guess what I'm going to do? I'm going to maintain the same risk I have in assets dropping. I'm going to buy more. I would intelligently buy these less expensive stocks that are on sale now.

Understand What Risk You're Currently Taking

Part of our planning process is to do a financial MRI. We look at all the investments and holdings you have, and show you the historical return of those and the risk you're taking to be in them.

Next, we pick an amount of risk that we can handle. This means, in a worst-case scenario, the plan still works. It’s not based on the fact it's the longest bull market in history.

We’re taking the most risk possible to capture all of the upside if the market keeps going up, and if it drops we’re still going to be okay. We're going to capitalize whether it's up or down because that plan succeeding is the key.

Success comes from creating a plan that's outside of your emotion. A plan that's outside of how your gut feels about the market. A successful plan says we can succeed no matter what the market does.

It is such a freeing experience to get off that treadmill of anxiety and market timing. Do you want to build a plan that wins regardless?

Sign up for a free consultation below and let’s figure out a plan that works for you.