This should have been expected. The drop has been deeper and swifter than most would have thought, but this should not bother us too much.
The fact that the coronavirus has spread so fast, and so many are ill, this could bother us.
Seeing so many people suffer economically, around us and globally, in so many ways… yes that’s bad.
Reading daily about the US, and so many other countries, in political turmoil… that’s terrible.
Finding that the stock market is correcting from terribly high prices. That’s not so bad.
The correction and the current stock market bear we see are part of a normal long term process . This correction creates opportunity.
I began investing more heavily in 2010 and began selling in 2019. I have liquidated about 35% of my major investments in the last year, so have been sitting on a pile of cash (aka US gvt bond ETFs) asking, “what’s next”.
Now I’m pretty sure of “what’s next”. I’ll invest in more good value shares.
The question is “when”.
To get some background on this, let’s look at at previous bear markets to see “when” it was best to invest more.
This chart below shows the performance of the Dow Jones Industrial Average for over 100 years (since Feb.1919). It’s interactive and I recommend looking it over. Click here. Macroeconomics.net
Let’s look at what happened to the Dow Jones Industrial Average at various points in each bear market over the past 100 years.
In July 1929 the DJIA rose to an all time high of 5,198. Then it collapsed to 814 by June 1932. The index did not regain that previous high number again until December 1958.
That full recovery took 29 years for investors who invested at the Dow’s all time high.
If an investor entered a Dow Jones Industrial Index ETF (if they had existed in that era) after the index had fallen 30% to 3,648 in July 1930, it still took 24 years for the index to recover to 3,733 in November 1954, or about 24 years.
However if an investor invested in the index after it fell 40% to 3,119 in February 1931, he or she only waited a bit over five years to November 1936 when it reached 3,324.
However… and note the trend as it repeats in each recovery, after achieving it’s high again, it dropped back and stayed below its all time high until August 1954.
Fast forward to the next bear that began in 1966. The DJIA reached a high of 7,884 in December 1966.
Investors who invested right at that top, did not see a recovery until August 1995 when the Dow reached 7,801, in about 30 years.
Investors who entered the market 30% below the 1965 high (5,519 in Sept 1969) saw it recover by March 1973 but then slipped until June 1987 and then immediately slipped again to September 1991. The full convincing recovery took about 26 years.
Investors however who waited until the DJIA fell 40% to 4,731 in December 1973 saw a recovery in January 1987, but again the index immediately slipped and did not reach that level again until August 1988, about 15 years.
In other words it took a full 15 years for a full convincing recovery.
The next DJIA high came in December 1999 at 17,671.
When this bear began, the index reached a 30% loss (12,370) by August 2002.
Those who jumped in then saw a quick recovery by June 2003.
The DJIA then rose into the 17,000 again, but fell quickly yet and the 30% loss range was not reached again until October 2010.
Those who waited for a 40% (10,603) fall missed the recovery completely. The Dow’s lowest point was 11,220 before it began the bull that just ended and rose to 28,738
The DJIA has already fallen over 30% from this latest all time high when it fell below to 19,730 on Friday March 20,2020.
A 35% drop will bring the index to 18,680. A 40% drop will bring it to 17,243.
This review provides three clues.
It suggests that the time from an all time high to the next takes decades, but the periods between them are becoming shorter.
There are also suggestions that investments in the Dow after a 30% drop have a mini crash after their first recovery.
In the last bear and bull, the crash never reached a 40% drop.
Investors who want to time markets and get in right at the bottom, might have a pretty good wait if history repeats. Those who increase their portfolios after a 30% drop can also have a considerable wait as well, but if they put of much longer they’ll miss the rebound.
This current market correction has been expected. During global secular equity markets, value shares are likely to drop along with growth equities.
Traditionally, value shares will fall less and recover sooner and more.
In the current valuations we should see a stronger recovery in value shares than with growth shares.
Learn how to get the Keppler Global good value stock market data below.
Coronavirus and the Stock Market Round TwoCoronavirus and the stock market. Round Two is coming.
This virus and the market faced off in the spring. The market won. As the chart below shows, after a huge March 2020 collapse,the DJIA is almost back to its December 2019 level.
The market’s back up, but history suggests that we’ll see volatility in the ten years ahead.
Here is a chart of the Dow Jones Index for the past three decades. The .dotcom bubble burst just before the beginning of the 2000 decade.
The market then went nowhere from 2000 to 2014. Finally it started reaching new high levels.
Such decades long sideways movement after a severe correction is nothing new in the stock market.
So everything’s in order… except the pandemic. The ravages of the coronavirus dramatically increase the unknown and this uncertainty is the greatest purveyor of weakness that a stock market can have.
Such delays have profound implications for older generations who may need to cash in equities for income. How do we maximize the return on your savings and investments during this extremely dangerous time?
For the past five years, my strategy, to protect against the next stock market crash and yet gain income and appreciation from rising share prices is to invest in an equally weighted portfolio of the value based country ETFs.
We track 46 stock markets around the world in our Purposeful Investing Course (Pi) to determine which markets offer the best value so we can be in a perfect position to take advantage of stock market corrections all over the world.
Since no one knows what the future will bring, investing in value makes the most long term sense.
Our Purposeful Investing Course (Pi) teaches an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required. You are investing in a diversified portfolio of good value indices.
Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares. Investing in an index is like investing in all the major shares of the market. You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.
To achieve this goal of diversification the Pi portfolio consists of Country Index ETFs.
Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country. ETFs do not try to beat the index they represent. The management is passive and tries to emulate the performance of the index.
A country ETF provides diversification into a basket of equities in the country covered. The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.
Here is the Pifolio I personally held at the beginning of 2019. Now I am updating my plan to decide when it’s best to invest more.
70% is diversified into developed markets: Austria, Canada, China, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.
30% of the Pifolio is invested in emerging markets: Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.
iShares Country ETFs make it easy to invest in each of the good value markets.
The ETFs provide incredible diversification for safety. For example, the iShares MSCI Japan (symbol EWJ) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Japan Index which is composed mainly of large cap and small cap stocks traded primarily on the Tokyo Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Japan so an investment in the ETF is an investment in hundreds of different Japanese shares.
iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.
There is an iShares country ETF for almost every market.
You can create your own good value strategy.
I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use. I call this strategy Purposeful Investing (Pi). You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets). This analysis looks at the price to book, price to earnings, average yield and much more.
This year I will celebrate my 52nd anniversary of global investing and writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.
Those five decades of experience have taught me several incredibly valuable lessons.
The first lesson is that there is always something we do not know.
The second lesson is that stock market booms and busts always eventually return to value.
Third, the only sure way to succeed is to use time not timing.
Time is your friend when you use a good value strategy. The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.
A 45 year portfolio study shows that holding a diversified good value portfolio (based on a good value strategy) for 13 month’s time, increases the probability of out performance to 70%. However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but during the pandemic to introduce you to this online course I am knocking $124.50 off the subscription.
Enroll in Pi. Get the basic training, the 46 market value report and access to all the updates of the past two years.
I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy, diversified investing.
If you are not totally happy, simply let me know in the first two months for a full no fuss full refund.
You have nothing to lose except the fear. You gain the ultimate form of financial security as you reduce risk and increase profit potential.
Due to the COVID-19 pandemic we have cut the subscription to $174.50. You save $124.50!
Then because this global recovery is going to take years, we’ll maintain your subscription at just $99 a year rather than $299. Your subscription will be autorenewed in 2021 at $99, though you can cancel at any time.
Subscribe to Pi today and you get a year’s subscription to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, plus begin receiving regular Pifolio updates throughout the year.