The emotional scars from the past financial crisis still run deep and never really seem to go away. This past week I received an email asking – “Will you protect me in the next bear market?” I am asked this so often that I should take a moment to comment.
When we lose money in any endeavor, including investing in the markets, it is not easily forgotten. Over the years, we all have taken our fair share of beatings in the market including me and 2008 still haunts. However, over time and, in spite of those past failures, I have figured out a way to move past it, carry on and get better.
Without risk, there is no reward. That’s the bottom line. While none of us will be able to reach the point that everything we do in the market is correct. Or, discover the holy grail of investing since no such thing exists. We can do some things that increase our ability to be successful. In my experience, it comes down to taking advantage of as many opportunities available while managing the risk properly to help us overcome when we are wrong. Being wrong is ok, staying wrong is not.
Ten years from now, there will be many investors who will be filled with incredible regret - being hurt in the prior financial crisis and selling out and abandoning sound long-term investment strategies. Including failing to take full advantage of one of the greatest bull markets we may see in our entire lifetime. This cycle never seems to change. It’s those human fears and emotions which are our biggest obstacles to investment success.
It still saddens me greatly how many succumb to their emotions. Those who allow their feelings of fear and mistrust, prevent them from seeing opportunities that are right in front of them. Far too much money has been lost by people preparing for and fearing the worst, than simply focusing on what is actually happening. How do I know this? Because some years back, that was me.
Without a doubt, things will change at some point and the bears will come to rule Wall Street once again. I am actually looking forward to that day, as I know all too well how to profit from such a bearish scenario. And when it comes the decline will happen very, very fast. It always does. But, until that next day arrives, my job is to focus on the market that lay right in front of us, right now in the present day. To learn from past mistakes and to focus on opportunities right now. If there is one thing you must do to do succeed in the markets, it is this.
Once you learn how to do that, you will be far ahead of those who are constantly expecting and looking for the reaper to come and ruin their life and take all of their money away. Remember, scared money never makes money and fortune favors the bold. This will always be true no matter what the market does next!