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Why We Love Market Downturns!

The stock market is more a game of emotional intelligence than it is logical intelligence.  The math is pretty simple its addition, subtraction, multiplication, and division.  What make the biggest difference in your success as an investor is your emotional intelligence.  This is how you react to the ups and downs of the market, news, and following the moves of others.

Here's a breakdown of why we are actually big fans of market downturns and how you can adjust your thinking to be less afraid of the short term swings with your investments.

1. We aren't gambling 

Investors and wall street have created an investment landscape that is more like a casino than proper investing.  There's all these get rich quick strategies, trading courses, and making bets on a blip on a screen from one hour to the next.  This has all been proven to be ineffective in the long term when you consider the overall gains, higher taxes, fees, etc.

We have no concern with what happens to a stock in a day, month, or even a year in some cases.  When you are truly investing for the long term, this will not affect you.  We've studied the most successful investors of all time for decades and every one of them know that the magic is letting investments compound overtime, avoiding excessive trading, and focusing on what you understand, so why would we try to deviate from their advice?

2. We buy businesses 

Our investment strategy is to put a portion of assets into the market as a whole in low fee funds, and the rest into individual stocks.  When you own a stock you own a small percentage of a business.  We make every investment with the mindset of a business owner.  When you own a company, you may have some good months and bad months, but you don't plan to sell the company or quit just because there was a good month or bad month.  You get into that company to run it for a long time, maybe even forever.

That's how we view our stock investments.  We strongly believe in the companies we invest in and would like to own them for decades or forever!  Unless something drastically changes with management, the economy, or that specific industry, we intend to hold on regardless of short term trends.  Wall Street is very short sighted and gets emotional after one quarterly earnings report, a bad news release, or missed expectations.  To us this is crazy, a business will not go straight up and focusing all your energy on the month to month changes is a waste of time.

We take advantage of the opportunities when emotional investors sell during these short term blips.

3. Bargain Hunting

Price makes a significant impact on your investments.  We focus on opportunities that we feel are undervalued, and a great business that will produce long term profits and growth.  Here's an analogy that may hit home.  Let's say you have been researching for months on a new car purchase.  You decide on a BMW that you love.  It has all the features, awesome LED display, great fuel economy, and spacious.  Now it's time to do your research for a potential purchase.  After searching on the internet for hours you realize that it seems the average price point for this type of vehicle with low mileage is around $50,000.

You search all the dealerships and find some for $53k, $55k, and $52k.  You're not going to be running to make an offer when you know these are thousands of dollars over priced.  After waiting a week you see a new listing pop up for $45k!  It has everything you wanted, low miles, and much less expansive than the average BMW listing you've seen online.  You would probably drop everything and head down to the dealership to make a deal.

This is why we love the market downturns.  When we believe strongly in an investment and a business, the cheaper the price, the better it is for us!  We know we will never time the market and that is a waste of time, but if we can continually buy small pieces of the company at more appealing prices, that's a great day for us.

The only time to be fearful of the market downturns is if you need access to that money in the short term.  Which if this is the case, we would never recommend long term investments into stocks and you would have an entirely different portfolio approach.

"Be fearful when others are greedy, and be greedy when others are fearful. "

***Investing requires risk and loss of capital, this is not a solicitation of securities and purely for educational purposes."

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