Dear FoGs (Friends of Greg):
If recent stock ticker tumult is making you queasy, my best professional advice to you is: Just. Burp.
The original adaptation of Roald Dahl’s Charlie and the Chocolate Factory (Gene Wilder, kids, not Johnny Depp) was among my favorite movies as a kid. It was a box office dud most likely because it portrayed kids as deceitful, rampantly spoiled brats. In one scene, our hero Charlie sneaks off to illicitly sample Fizzy Lifting Drinks - a Wonka confection in the beta stage. The drink’s carbonation is so powerful it allows Charlie to float in mid-air like Katy Perry at a Super Bowl halftime show. But as he drifts higher, Charlie is suddenly sucked into the giant churning blades of an industrial fan. As he’s about to be rendered into baby food, Charlie belches in panic and this unexpectedly slows his ascent of doom. Strategically spaced burps eventually return him safely to terra firma.
Market volatility is sneakily similar to Charlie’s plight: investors imbibe in the euphoria of their rising portfolios until they are woefully reminded how a seemingly mercurial market also taketh away. This most recent draft of volatility is a clear signal that this market is having a burp. Stocks descended in response to inflation projections and relatively expensive asset prices.
And that’s OK.
It is absolutely normal and beneficial for the market to occasionally correct. Such reboots squeeze out speculators and machete a path for more sustainable future growth. Of course, that’s like your dentist saying, “This might hurt”, just before jamming the plunger on that spear-sized needle into your gums.
The stock market corrects 10% about once a year. For a $1M investor, that’s like watching $100,000 dissipate into fairy dust. Ouch. Ultimately, white-knuckling through transitory risk is the golden ticket to ride the stock market.
Meantime, what should you do? Given his salty language and infamously Not Safe For Work metaphors, I don’t normally invoke the founder of the Chinese Communist Party for advice, but here it goes.
Facing a rebellion from the Central Committee over his spectacularly insipid economic plans, Chairman Mao Tse Tung advised his colleagues, “Comrades! If you are feeling upset, break wind!”
That is to say, if the market is having a burp, you can too. You’ll feel better.
And yes; Mao really did say that…
Greg Fields is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $1.8 billion in assets under management as of 02/22/21. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”