15 Strategies For Thriving When Stocks Drop

Hello, hello! Alexer, how you doing today? If you've been keeping a close eye on the markets and following the news, well, you might actually be worried today that your investments are at risk. Your bills will be harder to pay if inflation rises again, and your job could be on the line. Look, we know the anxiety, stress, and worry that comes with the uncertainty around money, and we're here to tell you it's going to be okay.

While the news articles coming out seem pretty panicky and scary, as Warren Buffett says, bad news is an investor's best friend. This means if you know the rules to play by, you'll come out on top. Now, quick side note here, we'll be diving deeper into all of this on the Alux app. We're going to give you the tools to handle any feelings of worry, anxiety, and despair.

We'll talk about how this will affect you even if you're not an investor or don't have any savings yet. We'll look at what's actually happening, how and when did it all start, and where it fits into the economic trends. If you don't have the app yet, download it now, then come back and scan the QR code on screen, because the QR code will give you a 50% discount. But you need to have the app installed first. You'll also get a 7-Day free trial, and we promise you will love it.

Okay, a couple of our lessons coming up this week is a two-parter on winning the game of life and how to use AI to nail your job search and craft a resume. All right, let's get back to it, and just a reminder: this is not financial advice. Okay? These are just solid strategies that we've picked up through all of our years observing the market and watching lots of wealthy people and how they invest.

All right, let's get to it. Here are 15 strategies for thriving when stocks drop.

So, first of all, seize the opportunities. Some say it's not a crash; the stocks are just on sale. It can be a good time to buy and hold because while prices drop, with enough time, they will go back up again. Just watch out for the dead cat bounce, where a drop in the stock price recovers for a short time before declining again.

A Wells Fargo study showed that the average 13-month return after a bear market is 43%. So only by knowing that, you'll be able to hold that stock for a while. If you can do that, you'll see some great profits. At the same time, mortgage rates are also lower. It's currently at 6.7% and expected to drop even further, so your payments will be cheaper. It's a good time to apply.

Now, is this a market correction or a looming recession? On the one hand, the Federal Reserve decided to maintain high interest rates despite inflation nearing its target. The US jobs report showed signs of weakness, there was an overvaluation in tech sectors, and Japan raised interest rates to prevent its currency from falling, which all caused panic and sell-offs among investors.

While on the other hand, a 4.3% unemployment rate isn't a recession indicator. Even the Som Rule, which was developed by economist Claud Oom to predict recessions based on the unemployment rate, which is seen as fairly accurate, usually says the unemployment data doesn't signal a recession. Corporate earnings growth is still pretty strong. The S&P 500 showed 75% of companies reporting earnings above estimates, and the Federal Reserve's current policy has room for interest rate cuts if there's a significant weakening of the job market.

In fact, analysts predict two rate cuts of 50 basis points each in September and November. If you looked at the S&P 500 over the last 6 months, this dip seems like a blip, but if you look at it this week, it seems catastrophic. So sure, it dipped, but it was lower in May, just 3 months ago. The truth is we just don't know yet. There are arguments on both sides here, but recessions and downturns are a normal part of the economic cycle.

So if you're able to see some opportunities right now, don't waste any time and do it.

Number two: don't allow your emotions to be the decision maker. It's normal to panic when the market is volatile. Go for a run when you feel panicky, but definitely don't sit down and sell off in a frenzy. Okay? It's like going to the supermarket when you're hungry; you're desperate, so you act on impulse and eat whatever you can get your hands on. When your actions are motivated by fear, following other people and not properly addressing your own portfolio and risk, well, then you're more likely to be impulsive and make moves that don't actually benefit you.

Approach your actions from a logical point and take your emotions out of it. Okay? Stay rational and calm, and you will be okay.

Number three: keep some cash under your mattress. Uh, no, actually, don't do that. That was just a joke. You don't have to go that far, but when things dip low, your cash should make up about 15 to 20% of your portfolio. Because as tempting as it might be to buy in the dip, you need enough cash in your emergency fund to create a buffer on any pressure or stress you might be feeling. This is going to be your safety net, so it is crucial.

Number four: ride the roller coaster. In some cases, it's best to just buckle up and ride it out. You don't have to take any sort of drastic action at all. You're already on the roller coaster, so panicking and jumping out or changing your mind about it is not going to help. You can use dollar-cost averaging to invest a fixed amount of money into an investment regularly, regardless of the share price.

This strategy buys more shares when prices are low and fewer when prices are high, which can lower the average cost per share over time. This helps to reduce the volatility on what you've bought. Time in the market beats timing the market; your investments will be more valuable if you hold them for the long term rather than trying to predict the market and what could possibly happen.

Number five: protect your career. Now, out of the biggest concerns during economic downturns is the thought of losing your job. So now more than ever, you should make yourself invaluable to your company. Take extra courses to upskill yourself. Make yourself available for extra projects at work. If you've been coasting at work, this should be your motivation to step up and show your team and company why they wouldn't be successful without you.

And while it might seem logical to stick with your company, the truth is that bad companies go out of business when there's economic instability. If you sense that your current company is starting to sink, well, it might be good to strategically start shopping around. We say strategically because this isn't the time to just go work for any company. It would need to be performing well despite the downturn, which shows its resilience.

And while it might seem counterintuitive, some companies still compete for top talent during downturns. They would be willing to offer a good salary and benefits just to attract the right people. It is a risk, though, because, well, new hires are usually the first to be let go during layoff periods, which is why you need to find a company that's shown growth and stability despite everything that's happening.

Number six: if you do decide to sell, do it strategically. This isn't a panic sell; okay? It's a strategic one. You trim your stock fat. In other words, you sell off what isn't benefiting you. Prevent losing too much on investments that have been underperforming and look like they'll continue to decline. Free up cash to buy stocks if better opportunities come along. Rebalance your portfolio and add to your emergency fund just to be safe.

You would have seen that some big-name institutional investors and funds have been selling off their stock holdings. Microsoft, Apple, Visa have all had significant sell-offs. Berkshire Hathaway sold about half of its holdings in Apple at the peak of their price. But this doesn't mean that those investors are exiting the market. No, it can also be a way to just free up cash when they think better opportunities will be coming along. Trimming your stock holdings in certain investments also allows you to rebalance your portfolio.

Apple is still one of Berkshire Hathaway's largest stock holdings, even after selling off half; it still has about 84.2 billion worth of Apple stock. It's really important not to panic sell at a loss when you do have the ability to just hold on for a little bit longer.

Number seven: block out the noise. Now, the news and noise from everyone else can make you pretty nervous, right? So nervous you end up following a strategy that throws off your goals. Live news updates and serious-sounding anchors can make you feel like, well, there's something you should be doing, right?

These kinds of news programs will make you feel like watching TV is kind of like your phone ringing and being told about a zombie attack. But if you pay attention to every article and every piece of advice from friends, well, you're more likely to try to predict and react to trends, which is impossible. Okay? And it can backfire so badly. The constant fluctuation during a downturn means you can make one decision you think is good and safe now, only for that to do a 180 tomorrow.

You need to create a barrier between the information you consume, what you remember, and what you act upon.

Number eight: capitalize on the gig economy. It's always good to have extra cash coming in during uncertain periods, so think about supplementing your income with freelance work. The gig economy is all about short-term contracts and it thrives during downturns and recessions when traditional job markets are unstable.

And while there's the fear that AI might affect the gig economy's growth, the truth is that if you know how to use it, you'll be at a major advantage. It's still growing rapidly, mostly because of these advantages and technology and changes in consumer behavior. In fact, projections show that freelancers will overtake traditional payroll employees by 2028 in the US.

Some of the most popular gig economy jobs include being drivers for ride share apps like Uber, food and package delivery services, and work in graphic design, writing, and software development. In the next couple of years, online education, healthcare support, and jobs in the green energy and sustainability fields like solar panel installation and energy auditing will be booming, so if you can get in there now, do it.

All right, Alexer, that's all the time we've got here for YouTube today, but our chat continues in the Alux app. We'll talk about what to do if you're planning to retire soon, how to cut down spending, whether to take what the economists call the flight to safety, where investors flock to buying bonds and precious metals instead of stocks.

And remember that QR code on screen gets you a 50% off discount, but you have to have the app installed on your phone first. So get it downloaded, then scan the QR code, and that 7-Day free trial is waiting there for you. That's all for today, my friend. We'll see you back here tomorrow. Until then, take care!

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