How to win the royal rumble with Mr. Market — The Fire Investor

There are so many recommendations, stock tips and forecasting in the market right now that it will make your head spin. What is needed more than anything right now is patience and persistence. Stick to your investment plan and maintain your emergency fund.

With investing in index funds you have to roll with the punches. You have to be fluid like water. Take what the market gives you and don’t fight back. Don’t try to beat the market. The battle is not about winning or losing. The goal is to reaching a draw. The only way to do this is by bobbing and weaving with no punches thrown. Just like the rapper Ludacris said in his song. When I move you move, Just like that. Follow the lead of the market. Don’t try to predict it’s moves.

The only way to do this is to ignore the outside noises. Ignore those want to be coaches at the ringside yelling at you to swing at the openings on the right or the left. The market can counter quicker than you think. A stock market crash usually happens when you least expect it. Don’t be lured in. Stand your guard. Keep up your defenses. Bob, weave, block. Bob, weave, block.

Continue to dollar cost averaging. Sell some off the top near market highs if you need the cash. Take what the market gives you. Buy a little extra during a crash if you can afford to. If the market is marking everything down by 30%, then buy a few more shares at a discount.

If you don’t want to dance with the market then the next best thing is to do absolutely nothing. Just forget your password and forget your account exists for about 5 to 10 years. Don’t even look. You will be much better off for it. Now I’m not talking about giving up. I’m talking about deciding not to do anything. To decide means to cut off all other options. I’m not talking about the indecisive bunch who’s motto in life is ready, aim, aim. Don’t do something, just stand there. That is the decision.

Now some might say, why not use an all weather portfolio to protect your losses? This is because this strategy is meant for your growth/risk bucket or nest egg as some like to call it. Your other two buckets which are Security/Safety/Emergency fund bucket and Dream bucket should be composed of cash and bonds. You could have whatever percentage of your savings in your growth/risk bucket as you like. For me I chose to invest 75% of my savings and I choose to put it in risky assets like stocks and real-estate, but for someone else they may chose to invest 25% of their savings and there is nothing wrong with that. It all depends on your risk tolerance. The goal is to have your asset allocation set up in a manner that will allow you to sleep well at night. Just like Jack Bogle said, just have a little bit more in bonds than you think you should.

Ben Carlson also recently wrote in his r ecent blog post on his site that there are generally two ways of looking at extended market cycles:

(1) We are in the midst of a paradigm shift. It is different this time. Markets have fundamentally changed. The top performers are going to continue outperforming.

(2) Everything is cyclical so it’s time to be a contrarian. It’s not different this time. We’ve seen this movie before. Nothing works forever and always.

When you take what the market gives you with investing in index funds neither of these two arguments matter. All you have to do is strap in for the ride and stay the course.

Originally published at http://thefireinvestor.com on September 15, 2021.