Stock Market Crash: The Worst Mistake You Can Make (Do This Instead)

Summary

In this video, the speaker advises against panic-selling during a stock market crash, emphasizing the importance of staying calm and sticking to a long-term investment strategy. He explains that for retirement accounts with a diversified portfolio, it's best to ride out market downturns rather than attempt to time the market. For non-retirement brokerage accounts, he suggests keeping cash ready for potential buying opportunities during a crash. The video also discusses the inevitability of market volatility and the flawed financial system, urging viewers to avoid impulsive decisions and focus on long-term growth.

Takeaways

• 😨 Don't panic sell during a stock market crash; stay calm and ride it out.
• 💼 For retirement accounts with a long investment horizon, maintain your diversified allocations and avoid trying to time the market.
• 📉 Stock market crashes and bear markets are inevitable, but markets historically recover over time.
• 🏦 If you need money in the short term, consider moving it to a savings account rather than leaving it in the stock market.
• 📊 Speculators should have cash ready to take advantage of buying opportunities during a market crash.
• 💡 Consistent investing, regardless of market conditions, is a recommended strategy for long-term growth.
• 📆 The average bear market lasts 9 months, while bull markets last about 4 years.
• 🚫 Avoid going all-in during market dips; it’s risky and could leave you with no cash for future opportunities.
• 💰 Stocks generally rise in the long run due to financial asset inflation, but extreme inflation could be detrimental.
• 🔍 Protect your investments with diversification and avoid making rash decisions during market volatility.

Q & A

What should one avoid doing during a stock market crash according to the speaker?

One should avoid panicking and selling off their investments impulsively during a stock market crash.

What advice did the speaker give to his uncle regarding his retirement account during a market crash?

The speaker advised his uncle to not change his allocations, to leave his retirement account as is, and not to attempt to time the markets with rebalancing.

What is the recommended approach for someone with a long investment horizon and diversified portfolio?

The recommended approach is to ride out the downturns without trying to time the market, as the markets are expected to recover in the long run.

Why did the speaker advise against selling stocks in a brokerage account if the money is not needed soon?

Selling stocks in a brokerage account when the money is not needed soon can be risky because if the market goes down further, one might end up selling at the wrong time.

What is the difference between investing and speculating in the context of the speaker's advice?

Investing involves a long-term approach with a diversified portfolio, while speculating involves taking high-risk, high-reward bets on individual stock picks.

What does the speaker suggest for someone who wants to speculate during a stock market crash?

The speaker suggests that speculators should have cash ready to capitalize on opportunities to buy high-quality, oversold stocks during a crash.

How long do bear markets typically last, according to the speaker?

Bear markets typically last for about 9 months on average.

What is the speaker's strategy for investing in the stock market regardless of market conditions?

The speaker's strategy is to invest a set amount of money on a consistent basis, such as monthly, without trying to time the market.

Why does the speaker believe that the stock market will go up in the long run?

The speaker believes that the stock market will go up due to financial asset inflation, which is a necessary outcome of the current debt crisis and the government's response to it.

What does the speaker suggest for people who are not professional traders trying to time the market?

The speaker suggests that non-professional traders should protect their money with diversification and avoid panic selling during market downturns.

How does the speaker view the role of governments and central banks in the stock market's long-term performance?

The speaker views governments and central banks as deliberately causing high inflation to solve the debt crisis, which in turn will push the stock market to record highs.

Outlines

00:00

📉 Stay Calm During a Stock Market Crash

The speaker advises against panicking during a stock market crash, especially for those with retirement accounts. They share a conversation with their uncle, who is worried about market volatility affecting his diversified retirement portfolio. The advice given is to maintain the current allocation and not to attempt market timing through rebalancing. The speaker emphasizes the importance of having a long investment horizon and being diversified, suggesting that market downturns are temporary and part of the natural ebb and flow of investing.

05:02

🤔 Navigating Investments and Speculation in Volatile Markets

The speaker discusses the difference between investing and speculating in the context of a brokerage account. They advise against selling stocks if the money is not immediately needed, highlighting the potential risk of selling at the wrong time. For those who engage in high-risk, high-reward stock picks, it's suggested to keep some cash ready to take advantage of market crashes for buying oversold quality stocks. The speaker also touches on the inevitability of market cycles, using historical data to show that markets recover and强调 the importance of not timing the markets but instead maintaining a consistent investment strategy regardless of short-term fluctuations.

10:04

💰 Long-Term Market Growth and the Impact of Inflation

The speaker presents their perspective on the long-term upward trend of the stock market, attributing it to financial asset inflation. They argue that stocks, in general, must increase in value due to inflationary pressures, even if this leads to a situation where everyone becomes a millionaire in name only. The speaker also addresses the current financial situation in the United States, suggesting that the only way to solve the debt crisis is through high inflation, which, while harmful, is necessary. They caution against panic selling during a crash and advise maintaining a diversified portfolio, viewing a market downturn as a brief period and an opportunity to buy rather than sell.

Keywords

💡Panic Selling

Panic selling refers to the act of selling off stocks or other investments quickly due to fear of further losses during a market downturn. In the video, the speaker advises against panic selling, emphasizing that it is a common reaction during stock market crashes but usually leads to locking in losses. The speaker suggests that it is better to ride out market downturns rather than make hasty decisions driven by fear.

💡Retirement Account

A retirement account is a financial account designed to help individuals save for retirement, often with tax advantages. The speaker discusses a conversation with his uncle, who was concerned about his retirement account's exposure to stock market volatility. The advice given was to maintain his current investment strategy, given his long investment horizon, rather than trying to rebalance his portfolio in response to short-term market movements.

💡Volatility

Volatility refers to the degree of variation in the price of a financial instrument over time. High volatility means that the price can change dramatically over a short period. The speaker mentions volatility as a cause of concern for many investors, but advises not to react impulsively to market fluctuations, as markets tend to recover over the long term.

💡Speculation

Speculation involves making high-risk investments with the hope of significant returns. The speaker contrasts speculation with investing, highlighting that speculation can be profitable during a market crash if one is prepared to buy oversold stocks. However, for most of one's portfolio, the speaker advises against speculative behavior, advocating instead for a more measured, long-term investment strategy.

💡Diversification

Diversification is the practice of spreading investments across different asset classes to reduce risk. The speaker recommends diversification as a key strategy to protect one's investments during market downturns. By holding a mix of stocks, bonds, and other instruments, an investor can mitigate the impact of a market crash on their overall portfolio.

💡Rebalancing

Rebalancing is the process of adjusting the proportions of different assets in a portfolio to maintain a desired level of risk. The speaker advises against rebalancing out of stocks during a downturn if the investor has a long investment horizon, arguing that such attempts to time the market are often counterproductive and can lead to missed opportunities when the market recovers.

💡Bear Market

A bear market is a period of declining stock prices, typically characterized by a fall of 20% or more from recent highs. The speaker discusses how bear markets are inevitable but temporary, and advises that investors should not panic sell during these periods. Instead, they should view bear markets as opportunities to buy quality stocks at lower prices.

💡Bull Market

A bull market is a period of rising stock prices, usually characterized by investor confidence and strong economic indicators. The speaker notes that bull markets tend to last longer than bear markets, averaging about four years, and suggests that over the long run, stock markets generally rise, making it advantageous to stay invested rather than trying to time the market.

💡Asset Inflation

Asset inflation refers to the increase in prices of financial assets, such as stocks, due to inflationary pressures in the economy. The speaker argues that in the long run, stocks must go up due to financial asset inflation, driven by the government's monetary policies. This concept is used to explain why staying invested in the market is a sound strategy despite short-term volatility.

💡Market Timing

Market timing is the strategy of making buy or sell decisions of financial assets by attempting to predict future market price movements. The speaker advises against market timing, particularly for long-term investors, because it is difficult to predict short-term market movements accurately. Instead, a consistent investment strategy, such as dollar-cost averaging, is recommended.

Highlights

Never panic sell during a stock market crash; it's important to maintain a long-term perspective.

If you have a long investment horizon and are diversified, it's best to ride out the downturns in the market.

Trying to time the market by rebalancing during a downturn is generally not advisable.

If you don't need the money soon, it's better to stay invested rather than converting investments to cash.

Investing is different from speculating; it's crucial to have cash ready to take advantage of market opportunities, especially during crashes.

Don't panic sell during a bear market; historically, markets have always recovered over time.

The average bear market lasts about 9 months, while the average bull market lasts around 4 years.

Significant market downturns, like those in 2000 and 2008, have been followed by recoveries, so it's essential to stay the course.

Going 'all in' during a dip can be risky because there's always a chance the market could drop further.

Consistently investing a set amount of money regularly, regardless of market conditions, is a sound strategy.

Consider any money invested in the stock market as a long-term investment, not something to be used in the short term.

Stocks generally must go up in the long run due to financial asset inflation, despite short-term volatility.

The U.S. is in a debt crisis, and inflation is being used as a tool to manage this debt, which will eventually lead to higher stock market levels.

If you're not an expert trader, it's safer to diversify your investments and avoid panic selling during market crashes.

A market crash can be an opportunity to buy, not a time to sell and lock in losses.

Transcripts

something that you should never do

during a stock market crash is panic

sell so my uncle asked me what he should

do with his retirement account he just

asked me this a few days ago he's

freaking out because of all the

volatility so I'm going to tell you what

I told him and I am my friend who's

asking me what he should do with his

brokerage account should he sell all of

his stocks like do something traumatic

like that so I'll tell you what I told

him and I'm I'm reading a lot of the

comments from my previous video about

the stock market and a lot of people are

asking should they buy this dip so I'll

tell you so let's start with retirement

accounts this is the conversation that I

had with my uncle and I want to give you

some context so he's still working he's

not thinking about retiring anytime soon

his retirement accounts composition it's

in stocks it's in bonds it's in other

instruments it's the recommended cookie

cutter allocations for someone's age but

stocks still make up a big portion of

his 401k and his IRA and he's is afraid

just like many other people of a stock

market crash so he's asking me should he

switch his allocations should he

rebalance out of stocks and I told him

no just leave it how you have it so the

reason why I told him that is because if

you have a long investment Horizon and

you're Diversified which is how money

invested in a retirement account should

be then it's just best to just ride out

the downturns it's as simple as that so

I told him that your retirement account

is going to be fine don't try to get

fancy and attempt to time the markets

with

rebalancing so later in this video I

will tell you how I know that he will be

fine and that the markets will go up in

the long

run but long story short I'll get into

more of the details but it's because

we're in a rigged system it's a rigged

game which again I'm going to explain

now my friend with the brokerage

accounts he asked me whether he should

sell all of his stocks and just sit in

cash so I want to clarify that a

brokerage account what I mean by that is

his stock market account that's not in a

retirement account so the first thing I

asked him was okay will you need the

money soon for example are you going to

need them are you going to need a big

amount of money soon for a down payment

or a big purchase and he told me no that

he's not going to need the money anytime

soon so I said good because if you need

the money soon like within a few weeks

or within a few months then yeah you

should sell all of your stocks right now

now and you should take that money that

cash and put it into a savings account

because if you need the money if you're

going to need the money sometime soon

and then if the market does go down if

the market does go down 20 30% or more

then you're going to risk having to sell

your Investments at precisely the wrong

time that's the problem that's if you

need the money soon which he doesn't so

that's good so then I asked them okay

well are you investing or are you

speculating and he said that he's mostly

investing his money in his brokerage

accounts that he's got index funds he's

got ETFs and more boring Blue Chips and

large Camp stocks but he told me yeah

he's using some of the money for stock

picks that are high-risk High

reward so this is what I told them I

said that if you want to speculate so

with the money that you want to

speculate with then make sure that you

have some cash ready in the event of a

stock market crash a crash is an

opportunity especially for a Speculator

because you're going to have the

opportunity to buy high quality stocks

that got

oversold but of course you need to have

your Capital ready you need to have cash

ready to capitalize on that

opportunity now for the money that he's

investing which is the bulk of his

portfolio or so he says so he

claims I told him in the event of a

stock market crash just don't panic sell

please don't do that so the average bare

markets lasts for 9 months the average

bull markets last for about 4 years so

bare markets they're inevitable stock

market crashes too you know they're

inevitable it's just it's just a part of

investing so stocks they go through

their ups and downs just like the

seasons it just it happens but overall

the markets

recover and they go up by Design which

again we're going to get into

so in the year 2000 the S&P 500 fell by

50% but then it recovered within 7 years

so that recovery took a bit longer in

2008 the stock market fell by 50% but

then it recovered within 2 years in

February 2020 the stock market so the

S&P 500 fell by 35% so that drop

happened quickly in about five weeks but

within 6 months the market recovered so

essentially if you're investing your

money the best strategy is just to ride

out the downswing so don't try to time

the

markets now I see a lot of comments

especially my previous video asking

about is now the time to go all in so

the answer is no like definitely

not if you're speculating if you're

gambling or you're just trying to play

it like a maniac then yes you can shove

all in whenever your gut tells you to

but if you're investing the answer is no

okay so here's why I'm saying that in

the long run yes the broader stock

market will go up

right but in the short run if the market

goes down and you go all in then what

are you going to do when the stock

market goes down another 10% you're

going to have no money to take advantage

of the situation because you went all in

and then you're going to feel so upset

with yourself that you made that

move in the short run well this here

here's the other side of the coin if you

don't buy now then what's going to

happen if the stock market goes up and

it never comes back down to this level

then you're going to be kicking yourself

in that situation too so short run who

knows what's going to happen yes there's

going to be heightened volatility that's

all we know now I'll tell you this you

are free to do whatever you want you can

invest like in adults or you can

speculate and gamble like a maniac you

know whatever floats your boats here's

what I do with the money that I'm

investing so every month I just put some

money into the stock market so it's a

set amount I don't care if the market

goes up I don't care if the market goes

down I don't care if it does nothing it

doesn't matter I just put in a set

amount on a monthly

basis if you want to do that every

paycheck if you want to do that every

quarter just be consistent about it I'm

not trying to time the

markets and listen it doesn't have to be

thousands of dollars it do if you if you

can do a thousands of dollars every

month that's great but it it doesn't

does have to be a large amount of money

if you can do hundreds of dollars that's

great if it's 50 bucks if that's all you

can do that's great as well you know

something is better than

nothing almost all brokerage accounts

all the brokerages out there they offer

free commission buying and selling of

stocks so you can invest and buy stocks

and sell stocks with a small amount of

money again that's what I do each month

I would recommend that you do the same

thing but any money that you send to

your brokerage account I would I would

say consider that money that you sent to

your brokerage accounts as a long-term

investment because if you're going to

need that money in the near future if

you're going to need that money in the

short term again I would say it's better

for you to park your money in a savings

account or a short-term CD especially

with the interest rates at these

levels and here's my way of explaining

how I know that in the long run the

stock market will go up and you can let

me know if you agree or if you disagree

this is just my opinion

first I don't want you to misunderstand

what I'm saying I am not saying that in

the long run that all stock market

investors are going to be rich that's

not what I'm saying I'm saying that

stocks in general must go up because of

financial asset inflation it's as simple

as that so for example I want to be

clear about this if inflation gets out

of control I know it's bad already but

I'm talking about just spirals out of

control then we're all be we're all

going to become millionaires like all

everyone and that's not going to be a

good thing it's it's all relative if

inflation causes everyone to become a

millionaire but if a big Mach costs

$30,000 and if a Honda Civic costs $85

million you know then we're not going to

be better off then we're basically going

to turn into a

Venezuela so right now the United States

of America is in a is in a very trick

tricky financial situation that's a nice

way of putting it it's because we are in

a debt crisis it's a debt bubble this

situation is unsustainable and the only

way to solve this debt crisis is two

solutions so the first one is that the

politicians become responsible they

balance the budgets and they start

paying down the national debts and you

and I both know that that is never going

to happen so let's just cross that one

off okay so I don't care who you have in

office

that situation that's not going to

happen because if you I don't care if

you're Republican or Democrat just look

at the history Bush added a record

amount of debt and then Obama added even

more debt than Bush Trump added even

more than Obama Biden added more than

Trump and whoever wins this one it

doesn't matter they're just going to

make the situation worse the national

debt crisis so the only way to solve the

debt crisis is intentionally cause high

inflation so that way it's going to

become easier to pay off the national

debts but the but the medicine of

inflation will be more harmful than the

thing that it cures the debt

problem so listen long story short if

the stock market crashes it's going to

be brief and the stock market will go to

record highs shortly after it is

necessary it's the only option this is

deliberately being done by the

governments in conjunction with the

Federal Reserve Central Bankers there's

no other way unless you believe that

deflation or debt defaults with an

economic depression is the better

option so listen carefully listen very

carefully to what I'm going to say if

you're a Pro Stock Market Trader and

you're that talented and you can time

the markets and you're that good then by

all means Buy sell Buy sell buy and sell

like a maniac to your heart's content

enjoy the volatility and make it rain

but if you're not some sort of trading

Guru protect your money with

diversification Don't Panic sell when

things get really bad it'll be brief

relatively speaking and a crash is an

opportunity to buy and it's a bad time

for you to sell and lock in your

losses that's my advice to you this is

what I'm telling my my friends my family

people I care about just try not to

stress about it it's not good for your

health Please Subscribe I have some

awesome content that's coming your way I

think you're going to benefit from it

thank you so much and I wish you a very

nice day take care