Five Things to Do If You Think a Cliff Dive Is Inevitable

Keith Fitz-Gerald Mar 15, 2017
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Many investors believe that a fiscal cliff “dive” is inevitable.

I can’t say I disagree.

Our politicians refuse to do anything but bicker with each other much to the detriment of millions of hardworking people, and playing “kick the can” seems to have become a national sport. Factor in a divided nation and it’s hard to imagine anything other than more foolishness ahead.

Doing these five things today will help protect you AND your money…

Concentrate On What You Can Control for Bigger, More Consistent Profits

Many investors approach money like they approach other people’s problems. Not only do they get too wrapped up in information that doesn’t concern them, but they obsess over things they can’t control.

The far better and far more profitable course of action is one we talk about all the time.

Concentrate on what you can control.

That way, you’re in charge.

Here are five steps to get you started today.

1. Stress test yourself

Never mind Wall Street’s hooligans, Washington’s Beltway Bandits, or even the world’s central banks. Take a good hard look in the mirror.

Be honest, do you like who or what you see?

Many investors are completely unprepared for the psychological impact of our world going over the edge. Trust me, you don’t want to be one of ’em.

Read the fine print on your brokerage statements and imagine what happens if the markets drop 50%. Will you cower in fear, or go on the offensive? Can your portfolio handle a stock market plunge Total Wealth-style, or will you be left grasping at straws when your 401(k) becomes a 201(k) like everybody else’s when the smoke clears?

Focus any discomfort you feel about the prospect into something productive, like realigning your expectations, your portfolio, and your investing tactics so you can capitalize on the opportunities a fiscal cliff dive will create. And, more importantly, profit.

The proprietary 50-40-10 approach that I wrote to you about recently, and which has been at the core of our sister publication, The Money Map Report, is a great place to start because it ensures a constant blend of safety-first choices, discipline, and upside potential that’s helped millions of investors for more than a decade.

2. Determine under which conditions will you sell

Many investors assume that we will wake up one day and somebody will announce that America’s gone over the fiscal cliff, that Europe’s vanished, or that China’s suddenly become a world leader.

I don’t think that’s the case. The markets are already adjusting to those possibilities, and while panic hasn’t set in, it’s only a matter of time before something changes if our leaders can’t get their act together and before most investors are prepared.

When that happens, the last place you want to be is standing on the sidelines with your thumb in some unmentionable part of your body wondering what to do.

Decide now – ahead of time – under what conditions you are going to sell, and why.

Your decisions can be part of some elaborate plan or as simple as a 25% trailing stop. It really doesn’t matter. That you are prepared ahead of time does.

I’ve had people tell me over the years that this is defeatist. That’s nonsense; no investor has to suffer the ravages of a bear market if they’ve prepared.

What I want you to understand is that you can turn any massive market decline into fabulous, life-changing profits by learning how to exploit the fear that’s going to send 99% of all other investors to the poorhouse.

3. Know which risks are worth your money

Wall Street’s lawyers love to point out that all investments involve risk. I agree, but that’s only half the story. What they don’t tell you is that not all risks are worth the investment.

Take the difference between large “glocal” companies and unknown startups, for example. The former are generally characterized by globally recognized brands, have fortress-like balance sheets, and long histories of raising dividends over time. The latter may be new, have inexperienced management, and unproven sales channels. Most pay no income whatsoever.

Do you really want to risk your hard-earned money with anything less than the stability and experience needed to survive a global financial upheaval?

Most investors, including me, wouldn’t.

That’s not to say there isn’t a place for startups in your portfolio. There is… especially when you can identify specific catalysts for future profitability like a growing number of patents, customers who are buying more of their product, and innovative game-changing technology backed by valuable Intellectual Property or “IP” as it’s known in Wall Street-speak.

Never forget that the path to windfall gains is based on keeping risks in line with rewards – not the other way around like conventional wisdom would have you believe.

4. Make consistency your mantra

Despite unbelievably challenging fundamentals and the most complicated markets in recorded history, many investors remain hypnotized by the promise of buying something cheap and having it turn into the next Alphabet Inc. (NasdaqGS:GOOG), Apple Inc. (NasdaqGS:AAPL), or Amazon Inc. (NasdaqGS:AMZN).

I understand. You’ve probably heard as many stories as I have over the years of people who have “made it big” buying some obscure company that turned into a gold mine. The greed gland is pretty powerful.

Just remember that huge profits come with huge risks. What people don’t talk about is the fact that many of the most famous investors of our time – think Jim Rogers, Warren Buffett, George Soros, and John Paulson, for example – have been known to work with huge amounts of capital and leverage.

Unless you are prepared to accept the risks like they do as part of a carefully disciplined overall investment plan, don’t play the game. Volatility is not for the faint of heart.

The real path to financial freedom and success over time for individual investors is through consistent winners and making fewer mistakes.

This speaks to an investment philosophy like Total Wealth or the Money Map Report, which are both grounded in strategies with higher probabilities of success, like an emphasis on income and total returns, fortress-like stocks with “glocal” capabilities, put selling, resources, and disciplined risk management.

5. Get ready to buy

With Europe teetering on the edge of another recession and some parts of the world flirting with yet another protracted slowdown that could be more like a managed depression, things couldn’t be more uncertain.

While I don’t personally like this reality any more than you do, from an investment perspective I’m very happy to pick through the wreckage and go bargain hunting if we get the opportunity.

Why?

Because history’s rearview mirrors show that fear, panic, crisis, and stress are all classic signs associated with huge life-changing profits.

This is particularly true for choices related to medical technology, certain kinds of big tech, and defense – all of which the world needs as opposed to wants, and all of which are backed by trillions of dollars whether we go over a fiscal cliff or not.

Grab your share or somebody else will.

Until next time,

Keith

7 Responses to Five Things to Do If You Think a Cliff Dive Is Inevitable

  1. Barry says:

    Hi Kieth

    As Always wise advice, I take notes on mental paper always, sometimes written or bookmark best reads

    Besides the above sage advice during perilous times

    Can u please when u have time update EKSO & CWCO, especially the former

    Please if u can include updated timelines ,

    You had originally given a 2 year time line for EKSO . We opened 10/2014 so that has passed, but you have always approved what it has been doing and it surely has been expanding its placement of units & getting positive feedback from studies, just the stock price hasn’t cooperated

    But all the company news seems positive that they publish on their website and it seems the company is moving forward so I need help in distilling its price action especially of late

    Thanks Barry

    • Keith says:

      Thanks for the kind words, Barry.

      Funny you should ask…I will be publishing an Ekso update tomorrow and I hope you find it helpful.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. Janice O Grossett-Bennett says:

    Where would you put $60K of 401K funds for safety, is the insurance business a safe heaven?

    • Keith says:

      Hello Janice.

      Unfortunately, I don’t know your individual investment risk tolerance nor your investment objectives so it would be terribly inappropriate for me to answer. That said, can you clarify what you’re asking so that I can possibly turn my reply into a column or a response for the entire Total Wealth Family?

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. Don Klinger says:

    I understand but what do you recommend for EKSO now ??

    • Keith says:

      Hello Don.

      The situation is definitely interesting at the moment and I’ve got an update for you in the morning.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  4. Aslam says:

    Hello Keith,
    What % of portfolio one should allocate to VXX?
    When buying puts for protection. how far away & what level. i.e. $100 stock should it be at that price or lower?
    Thank you.

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