To The Moon

🌟🌟🌟While not an official financial term, Market Armageddon is a dramatic metaphor used to describe a severe and rapid market crash or prolonged recession.  This is often accompanied by widespread panic and uncertainty.  It paints a picture of catastrophic event but the reality is that market crashes are normal, even though it is a painful part of the economic cycle.  They are always followed by a recovery and a subsequent expansion.

What to do during market turmoil?

The key is to focus on what you can control and maintain a long term perspective.  Instead of making emotional decisions based on fear, you should stick to a disciplined, long term strategy. 

Here are some steps you can take :

Avoid panic selling.  Selling during a market crash turns paper losses into real losses and guarantees you will miss the inevitable rebound. 

Embrace dollar cost averaging.  This strategy of investing a fixed amount of money at regular intervals allows you to automatically buy more shares when prices are low.  It helps remove emotion from your decisions and systematically lowers your average purchase price over time. 

Diversify your portfolio.  Spreading your investments across different assets classes (stocks, bonds, real estate), sectors (utilities, consumer staples, healthcare) and geographic regions can help reduce volatility and protect your portfolio.

Hold some cash reserves.  Keeping 1 to 2 years ' worth of living expenses in cash or other low risk assets provides a buffer so that you are not forced to sell investments at a loss to cover expenses.

Focus on quality stocks.  During uncertain times, it is important to focus on companies with strong fundamentals, healthy cash flow and low debt.  These businesses are better positioned to weather economic storms.

Consumer Defensive stocks.  Stocks in industries that provide essential goods and services such as Utilities and Consumer staples,   tend to be more resilient during economic downturns.

Concluding Thoughts 

Your biggest asset is not your portfolio.  It is your mindset.  The real armageddon isn't a market crash.  It is abandoning your long term plan during a crash.  The emotional cycle of complacency, fear, despair and frustration is a well worn path that leads to selling at the bottom.

Resist the urge to check the Fear Index every day.  The volatility is there to distract you, to tempt you into making an emotional decision.  Trust in your long term thesis and the proven power of dollar cost averaging. 

The market may go down in an elevator but it always go back up on the escalator.   The resilience you build today through patience and discipline is what will ultimately lead you to a future that you will be proud of. 

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