If you were invested in stocks last year at this time, you no doubt remember — probably with a knot in your stomach — how they began their fastest-ever descent into a bear market.
The rapid decline started one year ago today.
The major indexes fell more than 3%, which was 1,031 points on the Dow.
Reporters talked about stocks getting “slammed.” A Yahoo Finance headline read …
Wall Street dives on coronavirus panic, stocks have worst day in 2 years.
Is the craziness of one year ago still fresh in your mind? Or does it already seem like a distant memory?
We’ve come a long way since, and it’s important to look back at the lessons we learned — or, more accurately, the lessons we were reminded of.
They could have made you a lot of money then, and they still can now …
The S&P 500 hit what was then its all-time high on Wednesday, February 19, 2020. Three trading days later, investors got spooked by spreading COVID-19 cases outside of China … and then they started to sell.
Concerns over the global economy sent investors running for the exits like somebody yelled “fire!” in a crowded movie theater.
Just a little over a month later, the S&P 500 had dropped a gut-wrenching 34%.
It made our heads spin — including mine.
I’ve lived through some rough markets, and here’s one thing I’ve learned:
When the long-term outlook is bullish — as it is was then and is now — pullbacks, corrections, and even bear markets give you your best buying opportunities.
Pretty simple, right? But not so easy to do.
The best time to invest is when it feels the worst. When deep down in the pit of your stomach the last thing you want to do is buy a stock.
After the initial sell-off on February 24, the S&P 500 went on to lose 11% for the week. In MoneyWire that weekend, we talked about the buying opportunities that were emerging:
Let me be honest with you … I am not sure if Friday was the bottom or if it will come next week, or even a month from now.
But what I do know is that there is a large and growing list of quality stocks that have come down to prices that are extremely attractive.
I developed what I called the Road Map to Recovery, which followed a path from the bear market’s gut punch to the injection of stimulus from the government to a rally to new highs.
I bought stocks for myself. I bought stocks for my money management clients. And I recommended stocks to my readers.
In fact, in my Early Stage Investor service, we started the Crisis and Opportunity Portfolio on April 1. And I’m happy to say we were no fools. We worked our way up to eight stocks over the coming two-and-a-half months, and that portfolio has returned 231% in less than a year.
One year ago, did every one of the world’s most innovative, most revolutionary technologies suddenly get 50% less valuable?
Of course not.
Did the massive potential for artificial intelligence or electric cars or personalized medicine or the ultra-powerful 5G network suddenly fall by 50%?
It may seem like it if you just looked at just stock prices, but the answer was and is NO.
It was crazy to think that these hypergrowth trends set to change the world would slow down by half. And that’s what made their stocks absolute bargains for long-term investors.
During market panics, stocks go on sale. They can fall 30% … 40% … 50% … even 60%+ … despite their businesses not being impacted anywhere near that much.
Here’s the second thing we did when the sell-off started: We didn’t give in to the panic. We held on to good stocks we already owned.
I know that’s sometimes not as easy as it sounds either. But I’ve seen it happen more times than I can count when investors get scared, bail out of good stocks, and then chase their tails trying to figure out if and when to get back in.
Our timing was unfortunate when we started our Microcap Millionaire Portfolio — also in my Early Stage Investor service — just two weeks before the S&P 500 hit what was then its all-time high and less than three weeks before the market collapsed.
Those stocks got hit, too, and it stinks to see stocks you just bought be down 40%, 50%, and even 60% in just a few weeks. But I knew they were good stocks with big potential that hadn’t changed. They were just being overlooked. We stayed with them, and that portfolio is now up 156% a little over one year later.
You know the rest of the story.
The fastest bear market in history hit bottom about a month after it started, and five months later in mid-August the S&P 500 was at new all-time highs. It has continued to set records ever since, with the most recent just one week ago.
My mantra in recent years has become buy the dips. Some of my followers on Twitter have even started tweeting that, which is great.
It works when the outlook is bullish, and I believe the entire Roaring 2020s will be a decade for the record books. Several once-in-a-generation technologies are coming together at the same time and transforming virtually every aspect of our lives, from healthcare breakthroughs to an almost unrecognizable transportation industry to instant 5G wireless communication that will enable everything from self-driving vehicles to robotic surgery.
The bear market didn’t stop these trends. The pandemic didn’t stop these trends. The election didn’t stop these trends. And neither will anything else.
The impact these technologies have on the global economy will one day dwarf the internet. The way to make the big money is to invest in the companies leading the way. And if you get a chance to do so at bargain prices, your profits will be even bigger.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.