Ask Doc On Wednesday, the Dow Jones Industrial Average fell 800 points.
But the Dow didn't get the worst of it. The stocks that have been leaders turned into laggards. Tech shares fell while consumer staples and utilities held their value. The tech-heavy Nasdaq exchange fell 4.1%.
Yesterday, we saw another 700-point drop in the Dow.
The financial news headlines shifted to full-on crisis mode.
Everyone wants to know how to dodge the next big crash. "When will it hit? How will I know when to get out?"
The most constructive thing to do for investors at this point, is keep the panic in perspective...
Even a medium-term view, one day of losses isn't worth fretting over. As we've said before, these types of small corrections aren't rare. And, as we write this on Friday morning, stocks are already bouncing back.
So how do you make money in the market when things look chaotic?
Some think the answer lies in figuring out when the market will turn. That's not going to help. It's too difficult. You can go wrong by getting out too early, getting out too late, getting back in too early, or staying out for too long.
No one is going to get all of that right.
In fact, in the final "Melt Up" stage (to borrow an apt phrase from my colleague Steve Sjuggerud) of a bull market tends to be the most profitable.
As Steve recently told his DailyWealth readers...
- Just because stocks are expensive, it doesn't mean they can't go much higher.
- High valuations are a symptom of a stock market peak... but they are never the cause of a stock market peak.
According to Steve, "the real Melt Up is coming."
On October 24, he'll share what to do with your money to profit from the end of the Melt Up, and he'll give away his No. 1 investment pick right now. All you have to do is tune in.
Are you getting worried about stocks? Let us know at [email protected].
Q: On the Social Security website, the website states the calculated benefits at the FRA and age 70 are based upon a given amount of income will be earned from now until retirement.
Does it also take into account the lowest 35 years of income being rolled off for consideration and replaced with the last 35 years of higher income? If not, is there a website/calculator that does? – R.B.
A: There's a lot to cover regarding Social Security calculations. Basically the answer is yes, the Social Security Administration uses your 35 highest salary years in its calculations. It averages these years and applies that to its benefit formula to find your primary insurance amount (PIA). The PIA is the amount you'd receive at full retirement age.
There are some free calculators to use if you want to see your possible payout situations. The Social Security Administration has some on its site (right here). But it's worth trying one that allows you to adjust more factors, like AARP's calculator, Silver Wealth, or Financial Engines. There are some paid services out there as well, including one from our friend Laurence Kotlikoff. You can see his calculator right here.
Q: My wife and I were flooded out of our home in River Bend (adjacent to New Bern), NC as a result of Hurricane Florence. [...] Unless you have been through it, you have no way of knowing how utterly fatiguing it is to be retirement age (although I'm still working), have to do hard physical labor suitable for a 20-year-old to move all your belongings to safe locations (will not happen because everybody is doing that for themselves), and then try to salvage and clean things that were marinated in that remarkably nasty flood water. Now try imaging doing that with no water supply or electricity. Even when those are restored, you have no AC because that equipment was destroyed, notwithstanding they were up on 4′ stands to (you got it) protect them from flood waters.
Lastly, I grabbed our flood policy, and receipts for improvements on the home before dashing away from the house in our old Honda pulling a utility trailer as storm winds picked up. There is always something you miss. Make a list when there are no storms brewing! Your bug-out list. Scan all your family photos into the cloud. Everything else can be destroyed in household electronics. We have all in the cloud and also on a one-terabyte storage device which was in our bugout bag. – B.W.
A: Thanks so much for sending this, B.W. We hope you and your wife were safe during Hurricane Michael.
This e-mail just reinforces the importance of planning ahead for any emergency. It also highlights how quickly storms change – when we wrote the issue about Hurricane Michael, it was still a Category 2 and the projected areas were smaller. Over the next few hours after we published, it grew to the strongest hurricane to hit the continental U.S. since Hurricane Andrew in 1992.
Have a plan in place before any storm hits. If you can't physically leave, contact friends or family to get you out before it's too late. And we really encourage adding B.W.'s suggestions for your bug-out bag: be sure to have insurance policies in there and back up things to the cloud, not just an electronic device you might not be able to take with you. Even a portable hard drive is a great idea.
Q: [To survive a collapse] practice Transcendental Meditation like Ray Dalio of Bridgewater Associates does. It is effortless, very natural, and incredibly calming and grounding. Anyone can do it. It also helps you make better decisions. Do what I do, TM 20 minutes twice a day. It works. – N.W.
A: Great advice, N.W. In fact, my team thought I might have sent this in. I first learned about Transcendental Meditation (TM) in my freshman year of college.
Like other forms of meditation, TM reduces stress, chronic pain, and blood pressure. It also improves your sleep. And, as I mentioned last week, reducing stress helps you become a better investor.
I still practice TM on a weekly basis. If you learn to meditate and practice it regularly, you'll be amazed at how good you'll feel. To get started, I recommend you read The Relaxation Response, by Dr. Herbert Benson.
What We're Reading...
- Did you miss it? The crowd has spoken... It demands more risk.
- "All my friends were getting rich... And I was the fool stuck on the sidelines."
- Something different: The world of "renting" families.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
October 12, 2018