Blog: A message from our CEO
March 9th, 2020
Fear moves the market. And, right now, it occupies the entire market’s imagination. Franklin D. Roosevelt once said, “Let me assert my firm belief that the only thing we have to fear is fear itself.”
Fear drives change in behavior as well as consumption. Consumption, lest we not forget, drives two-thirds of our economy. That’s why the global coronavirus outbreak, election year unknowns, geopolitical tensions, and volatility in the energy markets are creating large swings in equity prices.
Managing risk in the coming days and months is going to be an essential skill and that, my friends, is why we founded dough. We know the cyclical nature of markets and our greatest desire is to help you navigate all market conditions.
So, what exactly can you do to mitigate risk? Consider these guides for the days and weeks ahead:
- Cash. A higher percentage of an account held in cash can enable purchases of stocks at more attractive prices should they present themselves.
- Bonds. Bonds and bond ETFs can help offset risk in stocks. That’s because they tend to move in the opposite direction of stock prices. This is an upcoming topic of The 3Cap with Ryan Grace.
- Defense. Consider the defensive sectors of the market.
- Trade small. Keep your position sizes small to ensure you’re comfortable with the risk.
- Diversify. Consider using diversified ETFs which helps spread your dollars across multiple underlying stocks and areas of the market.
- Beta. Familiarize yourself with the concept of beta. This is a great tool for understanding the risk of your investments.
- Long term. Consider dollar cost averaging as a method of building a position and thinking long term. Make sure to subscribe to our YouTube channel to receive a notification of the video on this topic coming this week.
As a trader in my early 30’s, I’m gifted with time, and therefore, the ability to weigh these market events differently than those nearing retirement. As informed market participants, we at dough do not easily fold and certainly never panic. It might be a bit early now, but I lie in wait to sell the hysteria and buy the panic.
Yes, it may get worse before it gets better, but I’m thinking long term. When the unknown becomes known it could remind us that reality isn’t always as bad, nor as good, as the forecast.
History has greatly rewarded this type of thinking. Life is good when you’ve got a plan. That said, it’s fist bumps instead of handshakes, at least for now.
Let’s be careful and take reasonable precautions to protect ourselves and our loved ones. Stay safe, stay healthy, and remember that fortune favors the bold while scared money doesn't make any.