Outsider Question of the Week, Dec. 7

Outsider Club's Weekly Reader Question "The Dow just tanked 800 points and my small stocks are even worse off! What in the world is going on?" — Harold M. NICK HODGE | Founder And it's down another 460 as I write this Thursday morning, putting us just about flat for the year on both the Dow Jones and S&P 500. This year is the trees. But look at the forest. Broad market You are receiving this email because you subscribed to Outsider Club. [Click here]( to manage your e-mail preferences. [Outsider Club logo] By Outsider Club Written Dec. 07, 2018 Outsider Club's Weekly Reader Question "The Dow just tanked 800 points and my small stocks are even worse off! What in the world is going on?" — Harold M. --------------------------------------------------------------- NICK HODGE | Founder And it's down another 460 as I write this Thursday morning, putting us just about flat for the year on both the Dow Jones and S&P 500. This year is the trees. But look at the forest. Broad markets are still up some 90% since 2013, or about 15% annually, which is well above historical averages. My advice is as it always is, you should have an ample amount of “safe” money set aside in a mix of low-cost stocks/funds/bonds that are age-appropriate for you and that compound returns/dividends in some way. History and data have shown that chunk of money should not be touched in times of market volatility such as we’re seeing now as long as your time horizon is long enough. You need to ride out the down days to be in the market to harness the upside. The damage of the giant, massive, worst-you’ve-ever-seen crash in 2008 was entirely erased by 2012. Keep your safe money safe — diversified and in the market. Your speculative money, some of which you might invest in the nutty ideas I come up with, should be contrarily positioned such that it delivers outsized returns if safe-havens, like gold, for some reason return to favor. --------------------------------------------------------------- [jason_simpkins_250x285]JASON SIMPKINS | Editor I feel your pain. No one likes to see their stocks go down; but context is key. We’ve been pretty spoiled over the past decade, because this bull market (which has run for something like 3,500 days) is the longest in U.S. history. It began all the way back on March 9, 2009. A baby born on that day is old enough to talk back to you at this point. Furthermore, even after these recent plunges, the Dow is still hovering around 25,000, which is up from 6,500 at the start. And the S&P 500 has quadrupled from an ominous low of 666 in 2009. The point is, this correction was loooooonnnnnggg overdue — and really, it hasn’t even been that bad. The headlines look bad, of course. Newspapers love stock crashes as much as they love plane crashes. They’ll report on a major Dow drop with the same somber enthusiasm as they do an assassination or a natural disaster. Most people hate to be the bearer of bad news, but the media loves it. They want you to panic about your 401(k) or your IRA, but unless you’re retiring tomorrow, you can rest easy. Heck, even if you are retiring tomorrow, you’re still making out pretty well considering the gains we’ve seen. You’ll be fine. So my advice to investors is this: 1) Take this as an opportunity. If you have sell-stops locked in, then hopefully you’re cashing out with a little bit of profit. Best-case scenario, you can buy back in or go bargain hunting. Similarly, if you’ve got long-term investments that you like, then dips like these are a good time to add to your position. Doing that will amplify your gains down the line and increase your dividend yields. 2) Once you’ve done that, ignore the media. Stay away from CNBC, Fox Business, the Wall Street Journal, and any other outlet that’s crying out for eyeballs. They aren’t going to do anything for you. The same goes for your portfolio while we’re at it. You’ve already bought the stock. You’ve already decided to keep it. That’s all you can do. Watching what it does day-to-day is just torturing yourself. Investing isn’t for the faint of heart. Bull markets don’t last forever. Stocks don’t go up in perpetuity. Pick a cliché. I know it sucks to see your stocks go down. I feel it too. Everyone does. But any amount of obsessing usually leads to emotional decisions, not rational ones, and thus poor choices. So hang tough. The Dow shed more than 50% of its value in 2009. And look where we are today. This is nowhere near that bad. The U.S. and global economies are far better off now than they were then. This, too, shall pass. --------------------------------------------------------------- [gerardo_del_real_190x190]GERARDO DEL REAL | Editor The combination of the tweeter-in-chief’s schizophrenic (did I say that out loud?), I mean contradicting, tweets have not been a source of stability this early December. However, as we’ve seen in the past, the pullback is likely a correction in a clear bull market — as it relates to the U.S. indices. You’ll see permanent volatility from here on out but European markets will blow up before the U.S. markets do. Hi Deutsche Bank! As for the small-cap stocks, it’s been a very humbling year and one of a historical disconnect between value and share price. Great if you’re a contrarian with capital to double down and take advantage of the “blood on the streets.” Not so great if you’re holding through it and need to sell. Tax-loss selling season is not our friend, as nearly every small-cap in the resource space is a tax-loss candidate, but I expect a robust rebound post-New Year and an exciting — for the right reasons — 2019. --------------------------------------------------------------- To [learn more about our editors](, visit our website. And keep an eye on your inbox for Gerardo's (Mondays), Nick's (Wednesdays) and Jason's (Fridays) weekly articles. Submit a Question for the Outsider Club If you would like to ask a question of our editors, simply hit 'reply' to this email. Keep an eye out for future issues to see if your question has been chosen. Please note that not all questions will be selected, and due to the large volume of email we receive, it is unfortunately not possible to respond directly to those emails not selected. Enjoy reading this article? [Click here]( to like it and receive similar articles to read! 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