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Finally…5 ways to use market volatility to improve your investments
You'll wish you had done these sooner....
The World Is Changing...fast!
​Yes, the Fed is adjusting interest rates. Yes, the market has been dropping and there is huge volatility. Yes, taxes are going up; housing is crashing and there is an inflation problem. But the following 5 steps can help you rise above it all.
Most people these days are experiencing a bit of financial pressure. From an increase in fuel prices and food prices at the grocery store to a decline in asset prices. Around the world, no one has been spared in this latest recession. The official inflation rate was recently reported at 9.1% (and then back “down” to 8.5%). But if you have been spending money on almost anything, you’ve noticed that it’s much higher.
Now the Fed is getting serious about raising interest rates, throwing the economy into a serious recession, and hoping somehow to orchestrate a soft landing.
For now, just know that there are five ways that you can start to take advantage of all of this volatility and turn it into your own money-strength:
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1. Use a dollar-cost averaging strategy to invest into assets like real estate. Nobody can ever predict which way the market is going to go. So, if you are trying to buy assets even the best chart readers can’t predict the exact tops on the exact bottoms of prices on assets. One great strategy is to use an averaging approach called dollar cost averaging, or DCA for short. When using DCA, you set a regular time and date when you will make a certain dollar amount into an investment and then you make that investment no matter what the news or circumstances. For example, maybe you decide that the 3rd of the month, every month, you are going to buy $100,000 of a certain stock.
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​The idea is that, over time, if the investment goes up, it will provide you with an unemotional, average entry price. And in bull markets the DCA strategy has been proven to work consistently. However, the downside is that it may take a long time for asset prices to recover.
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2. Invest in yourself. While investing in yourself doesn’t provide a tangible monetary return in the short term, longer term it creates an increase in income, net worth, relationships, and standard of living. This fact has been proven by many studies and many financial gurus – most of whom believe that the more that you invest in yourself, the better. You can control your thoughts, emotions, and expectations in order to get the financial result that you want.
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3.Invest in your own business (if you have one). This is kind of a subset of investing in yourself, as discussed earlier. If you own a business. Or are inclined to run one., often the best thing that you can do in a downturn is to invest in someone that you believe in: namely, you. If you have a solid business in a solid industry with solid customers, then it makes sense to crank up your marketing, your customer service, and your quality so that, as others struggle during the downturn, you can remain strong and survive so that you thrive on the other side of the recession.
Housing markets around the country have peaked and are now starting to come down. Inventories are increasing. Buyers are slashing prices. And with interest rates rising, fewer people are able to find mortgages that suit their financial picture.
In the past, high net worth individuals were able to find shelter in real estate, the stock market, gold, Bitcoin, and other assets that traditionally did well in an inflationary environment. However, that is not the case this time.
Yet through all of these gyrations, one thing is consistent. Volatility. Now, most of us don’t enjoy volatility in our investments. However, if you know about it – and you know it is here to stay – you can take advantage of it. More on that later.
4. Invest in assets that consistently provide cash flow. They say that cash flow is king. And that makes a lot of sense. Why? Because when you have an asset that pays cash flow, it makes it a lot easier to stomach the downturns because it you are still in an asset that is making you money.
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Some real estate, like rental housing, AirBnBs, and strip malls, provide consistent cash flow to their owners. Also, if you hold mortgages that are secured by real estate, especially residential real estate, then that cash flow is generally a safe bet too. Be careful when getting into non-cash flowing real estate like vacant land, or even some of the alternative investments that are cropping up in the metaverse. Assets like gold and silver, as well as assets like cryptocurrency, generally do not pay enough reliable cash flow to make the risk worthwhile. However, there is an interesting way to utilize the stock market to create reliable cash flow from assets. It is used by some of the largest hedge funds in the world, and people like Warren Buffett use it to create income from their assets.
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How it works is actually quite simple. There are four steps to the process.
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Find an asset worth holding
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Make sure that the market is in the right trend for the asset.
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Find the highest probability point on the stock chart to purchase this asset.
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Use other people’s appetite for risk to create your own cash flow machine on that asset.
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In fact, it is common to make 2% to 4% per month using a cash flow machine strategy such as this. However, as with anything, there are some nuances to using this system. But that’s just it, it’s a system.
A system is a set of rules and procedures that prevents mistakes from happening when a certain amount of emotional information is presented. Mistakes limit profits. And rules create reliable procedures that increase the likelihood of creating cash flow from the market. To create your own Cash Flow Machine, click here and learn more about how to create reliable income from the stock market.
5. Invest in technology assets. Technology has been driving our economy for over 150 years and now is no different. In fact, according to Moores’s Law, our technology capacity and speed double every 18 months. So, you must be aware of it so that you can take advantage of the technology changes.
One of the most recent innovations has been that of cryptocurrency, namely Bitcoin. There is much debate about the benefits and drawbacks of cryptocurrencies and Bitcoin but one of the things that cannot be denied is that it is a technological innovation that is here to stay. In Bitcoin’s case for example, it has an element of scarcity in that a certain number of Bitcoin will be made and that’s it. Compare that to every other major currency in the world and you realize that those currencies have no limit to the number of currencies that are created. When something is relatively scarce, it eventually goes up in value if it’s desired, so you may want to consider making Bitcoin a part of your investment portfolio (alongside your precious metals investments) because it has such upside potential compared to the fiat currency world.
Mark Yegge is a hedge fund manager and host of the Wealth Architect Podcast. He has over 45 years of experience in investments and has traded over $14-billion in securities. The information provided here and on this site is an opinion and for educational and entertainment purposes only. Seek competent financial advice when making investments.
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“Never give up your power in your health, your wealth or your time.”
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– Mark Yegge ~ Wealth Architect
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