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Been Here Before — Watching the broader markets generally backslide and some of your net worth evaporate is challenging. For some of you, you’ve been here before. For others, this literally is your first rodeo.
If this is the first time you’re watching markets get crushed by fear and low confidence in the broader economy, here’s some life (non-financial) advice: it’s not the end of the world.
Markets have been here before, and they will be here again.
It turns out that most of the money you’ll make investing in your life is made in a bear market. Continually buying stonks at all-time highs is no fun, and it’s impossible to make money buying at those levels.
There are a ton of great businesses out there whose multiples have contracted because that’s the way the wind is blowing. They will return to their former glory, and they will climb above and beyond their all-time highs that seem far in the rearview mirror right now.
At the same time, other assets and companies will not survive. Some companies go to zero because they should. Whether they are a fraud or their business isn’t actually successful, when liquidity dries up, so do opportunities for phantom or zombie companies.
We may have witnessed a shitcoin exodus that could never have happened in 2020 or 2021. $2Bn were wiped out this weekend, and as the market continues to tumble, crypto will probably see a prolonged selloff.
When I was a young investor, I had a big loss on a speculative bet in an airline stock that had declared bankruptcy, but I thought there was a takeover bid from another airline that would result in a big payday.
I lost about 50% of my initial investment. It was a 1500 dollar loss, which is not a lot of money over the course of a lifetime in the markets. But to me, it was a huge loss. I learned a lot, and I licked my wounds for probably too long, eventually limping back into stocks a few months later.
My point is this: an early loss when you have a long timeline in front of you can be a good thing. I always say your first loss is your best loss because it’s the greatest opportunity to learn from your mistake.
If you’re down 50% this year, this probably doesn’t sound comforting. However, if you stick with it and never repeat a mistake, eventually, you’ll be rolling in it.
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