To all of our CFE Finances customers and to all investors. This month of October has been a tough month to be invested in the stock market. We at CFE Finances want to help all investors through this stock market downturn. This month of October has put fear into investors. The fear has caused the market sell-off. Why wouldn’t investors have fear after seeing their profits in stocks, mutual funds and ETF’s (exchange traded funds) go down 13 days out of the last 15 days. How do you deal with your portfolio dropping without selling your solid investments. Stocks have dropped even after companies have reported higher quarterly sales and earnings that were above analysts estimates. To be fair some stocks have dropped due to a lower future outlook. Why is this happening? It’s due to fear caused by all the bad news of higher interest rates and the China tariffs effecting companies cost of goods.
We understand if investors have sold their investments, due to the amount of selling in the markets and have made a good profit. We think if you need the money in the near future its okay to sell. If you can wait until the markets goes higher with high quality stocks you own stay the course of being fully invested in the market. Future retirement investments will still be investing into stocks. There is going to be plenty of cash entering back into stocks once stock prices reach their oversold stock prices. A couple of other options you have is put some of your stocks or mutual investments and ETF’s into a cash account although if your money is in an after tax brokerage account prepare to pay capital gains taxes on your profits. If you are close to retirement you could invest some of your money into an annuity. Be sure to read our newsletter on the Fixed Annuity.
Nobody knows the reason why stocks are oversold but many economics and TV stations like CNBC and Fox news are blaming the federal reserve for raising interest rates and the Federal Reserve Chairman has stated he is hawkish about raising rates in December as well as three times in 2019. There is always risks in stock investing. Although there are high rewards when investing in stocks over the long-term.
US banks are selling-off due to higher rates that will affect their future earnings. Today October 24, 2018 US housing prices were reported down 5.5%. Higher rates are designed to do this to slow down inflation. Also US relationship with China has cause fear due to the increased tariffs and investors wonder how long the trade war will last before US and China make a deal. It is important to note the China stock market has dropped more than 20%. Other countries like Japan and Europe markets are down. Volatility has increased in all world markets in October.
So we need to have a strong stomach for this sell-off and be patience for the upturn. History has shown sell-offs over the last 30 years have created market upturns. We have to realize as investors we need to take the good with the bad within stock markets especially if you have a long time before you retire. We at CFE Finances think once October is over the markets will begin to go up and investors will go back to buying and selling stocks with fundamentals and technical analysis in stocks with strong sales and earnings rather than selling on fear. For example the stock market should go up when stocks report great sales and earnings. Another reason the month of October is known as a market sell-off is because it is the month when stock funds managers are taking profits to show their customers their yearly performance.
This may seem odd but there are some good things that can help an investor portfolio after a sell-off. For example when invested in a work retirement account you are buying at lower prices of mutual funds and ETF’s on the day you are paid. Investing at lower prices make you more money in the future when the market goes up. Second you enjoy the dividends of stocks and mutual funds which are reinvesting dividends at lower prices that will buy you more shares. Remember investments wealth grows through compounded money overtime. Buying at lower prices over time builds wealth. Stocks on your wish list can now be bought at lower prices. Also the stock markets new lows are setting up for a longer bull run. Stay invested for the long hall investing in great US companies.
Happier days are on the way. Keeping doing your research on your existing and future trades. Most importantly, remember invest in great companies because their stock prices will increase as their business grows their sales and earnings. If you have any questions please email us on our contact page. Happy Investing!