Your Survival Guy

Preparing your investments and family for when disaster strikes.

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Your Survival Guy: Panic? Stocks Fall 700 Points

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By Shay Yacobinski @ Shutterstock.com

OK, stocks go down, as witnessed by yesterday’s 700-point drop in the Dow. Does that mean it’s time to panic? Well, that depends on how you’re invested. If you’re with me, as I hope you are, you know that stock market drops are a blessing in disguise to Your Survival Guy. Because when prices are lower, I smile at the better prices I’m getting with reinvested dividends. It’s like real estate.

Imagine you’re a landlord like Your Survival Guy was in his early- to mid-twenties. My multi-family in Marlborough, MA, was a cash-generating machine. Rents would come in every month. I’d pay down the mortgage, increase my equity, and have enough left over to get pizza at Bertucci’s with Becky. When we were married, I used the proceeds from the sale for the down payment on our Newport, RI cottage.

And that’s what you’re doing with dividend-paying stocks. You’re building equity with more shares, or in other words, increased ownership. So don’t be dismayed by lower stock prices. But, believe me, I understand why lower prices are hard to take. I remember how scared I was when I asked my dad how to run my property. He said, “You’ll figure it out.”

And that’s where the safe side of your portfolio comes in. With my dad’s confidence in me, I knew that if I kept the building full, I could make the numbers work month to month. But my fallback was my job at Fidelity Investments, which gave me the peace of mind to cover any shortfalls over the short term. That’s where the “anchor to windward” part of your portfolio comes in. It reduces the panic level. Because when trouble begins to creep in, mistakes are made.

Consider when investors get greedy and think making money is EASY. It’s not. Then the financial disaster of 2008 hits them out of nowhere with only a few percentage points of ownership, levered to the hilt, and they lose it all. It happens all the time.

Action Line: If you find yourself wringing your hands or hanging your head instead of licking your chops because of a lousy swing in the market, then it’s time you rethink how much exposure you can afford. I’m here to help. But only if you’re serious.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com