We are in interesting times. As you know if you’ve been following me for a while, I follow stock market cycles.

I’ve been expecting a world wide sovereign debt crisis because of cycles. I call the string of events happening, “the tunnel”. I’ve been explaining it in my Be Wealthy & Smart VIP Experience.

Needless to say, I’ve been expecting a disaster in bonds, currencies, commodities and stocks – and it’s worldwide.

I don’t like to be alarming, but this one is a crash that’s been predicted by some cycle experts for 30 years.

Billionaires know this and are ready for it.

That’s why I started the Be Wealthy & Smart VIP Experience – to share my information about cycles with the general public so billionaires weren’t the only ones who knew cycle changes – including booms and bust cycles – in advance.

Stock market pull backs, and crashes, are part of investing so you need to have a strategy to handle them.

Rather than hoping they won’t happen, you have to accept them as part of investing and learn what to do because the stock market drops about 10% every 11 months on average.

The Dow Jones Industrial Average has dropped 20% 12 times since the end of WWII. That’s about every 6 years.

So why don’t financial advisors teach you this? Why don’t they prepare you for this? Why do they act like it’s unusual?

I guess they don’t like to talk about things that can scare clients away.

Rather than ignore it, let’s embrace pullbacks and crashes!

Like Warren Buffet says, the stock market is the only thing that when it goes on sale no one wants to buy it!

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Before I tell you what to do after a crash or pullback, let me make an important point.

I want you to remember that “non-growth” is the enemy, not pullbacks and crashes.

What I mean by that is NOT investing or not growing your money is worse than investing and experiencing a pullback or crash.

You might not think so intuitively, but it’s true.

You are worse off in your 401(k) or your IRA by NOT investing in stocks than you are if there’s a pullback or crash.

Why?

Because by NOT investing, you won’t get to compound at higher rates (Step 5 of my 6 Steps to Wealth).

You MUST compound at higher rates in order to build wealth.

You can’t let your money sit in a money market account at 1% and expect to become wealthy.

You usually can’t “save” enough money and become wealthy. It’s not about saving money, wealth is about investing!

Because compounding at a high rate is what makes you wealthy!

And to do that, you have to take risk. You have to invest. Whether it’s stocks, real estate, silver – whatever you choose to invest in, you have to take risk.

You can mitigate risk by studying cycles and understanding where the best place to invest is long-term.

My point is, you MUST invest if you want to be wealthy. Period.

In my opinion, once we experience this world wide sovereign debt crisis and crash, the US stock market will still be one of the best places to invest going forward.

So let’s talk about how to embrace this decline that’s coming in the stock market and what to do when it happens.

1. Do nothing.

That’s right. When you experience a sharp pullback or a crash, it’s too late. If you didn’t know from cycles that it was coming ahead of time and could raise cash before it happened, then it’s too late to do it after the crash.

In fact, selling after a crash is the worst thing you can do! Don’t do it! Don’t sell!

Most of the time, the stock market will at least have a strong move upward after the crash (called “a dead cat bounce”), so wait for the move up if you’re considering selling.

My advice is don’t sell even after the dead cat bounce. It may take a few months or a few years, but the stock market has always recovered eventually and then gone higher.

It will next time too.

2. Don’t panic.

The worst thing to do is to panic! Don’t panic! 🙂

Don’t call your broker and say “Get me out! I don’t care if I’ve lost money, just get me out!”

Those very words are spoken by many inexperienced investors right at the very bottom – before the big dead cat bounce comes!

What you’ve done is locked in your losses!

You’re not invested so you won’t benefit from the bounce.

You may be fearing you’re going to “lose all your money” and guess what, your fear is going to cause it to happen if you sell at the bottom!

Don’t do it!

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3. Resist the urge to sell.

Under all conditions, resist the urge to sell. This is NOT the time to sell. You will only do yourself serious harm if you sell.

Accept that pullbacks and crashes are part of stock market investing. Expect it. Embrace it. Relax and know it won’t last forever, no matter what the pundits are saying and how many chicken little’s appear on CNBC saying the world is ending.

Remember the stock market is made up of businesses and businesses sell things to people.

When you wake up tomorrow, you’ll still have to eat, work, drive, and buy things and so does everyone else.

You may change your spending priorities depending on how well the economy is doing, but you still will spend money.

Therefore, companies will still be in business tomorrow even if their stock price is a lot lower today.

Apple will still be selling computers and phones tomorrow even if their stock price goes down by half. That’s not a buy recommendation, I’m just sayin’.

4. Consider buying – stocks are on sale!

Yesterday stocks were a lot more expensive than they are today, so get out your shopping list of stocks and decide what you want to buy.

Think about the products and services you spend your money on. They may be a place to start looking for potential investments.

What are the trends today that will continue for years? Are solar panels and electric cars something that could have strong sales for years to come? Perhaps they are worthy of further investment research like are they over-valued or under-valued? What is their earnings growth rate? Is it sustainable? Is it steady? What is their relative strength compared to their competitors? Are insiders buying? What new products and services do they have coming out soon?

These are just a few things to think about before buying a stock.

5. Consider re-balancing your portfolio.

After a crash or pullback, take a look at your portfolio and see if you are positioned as well as possible. Are you in sustainable growth companies? Are you in consumer staples – things people will buy even in a recession?

If you’re too heavy in bonds, perhaps sell some and buy dividend paying stocks that could perform better. Think about what percentage you have in stocks, bonds, international, emerging markets, real estate, etc.

Perhaps you have too much in small company (small cap) stocks and want to be in larger companies that have more staying power or perhaps there are some small companies that are strong growers in a niche and can navigate tough waters better like a speed boat versus a cruise ship?

6. Check your fear level.

Fear does nothing but cause you to freeze, so if you’re feeling fearful, start doing some research that will make you feel more empowered. Go buy an Investor’s Business Daily at the store and read it. See what they are saying and look at the charts of the market leaders. It’s an inexpensive way to do professional research.

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7. Check your 401(K).

Go online and check out what your 401(k) is invested in. Refer to point 5 for re-balancing. Again, large companies that pay dividends might be a good buy because you get the dividend of say 3% plus the appreciate of the stock. Together they can provide a good return and compounding rate.

8. Get your shopping list together.

Think about what stocks you’ve wanted to own the last few years. This might be the time to pick them up for a bargain. Be sure there’s nothing that has changed with them fundamentally, like they have problems paying their debt or something like that. If they still are going to have strong sales and strong growth, consider buying them. Look at their chart. Look at their earnings and P/E ratio. Are insider’s buying? Are they doing a stock buy back, where the company is purchasing their own stock?

9. Look at dividend paying stocks.

I’ve already mentioned why dividend paying stocks can be a good idea because of the dividend plus the price appreciation. Research dividend paying stocks by Googling it. Be careful not to just pick the highest dividend, however. Sometimes that’s caused by a low stock price that may not improve soon. Rather, use the dividend as one factor of many to consider when buying a stock. If you haven’t listened to my podcast, “What Makes Stocks Go Up?”, listen here.

10. Think about buying defensive, consumer staple oriented companies.

Investopedia defines consumer staples as “goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation. Consumer staples stocks are considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing.”

Pick out what companies are fast growers that are likely to rebound, even in a recession. Think about defensive companies – things people buy even during a recession like cigarettes, liquor, pharmaceuticals, groceries, dollar stores, liquidators, gas, drug stores, snacks, soft drinks, fast food, cosmetics and other consumer staples.

So there you have it. Get used to stock market pullbacks and crashes. They are here to stay. I will say that stock market cycles look like they are going to get even crazier over the next few years with more huge moves up and down.

If you’d like to learn more about being in my insider circle and invest along side me in the Be Wealthy & Smart VIP Experience, join my list at www.lindapjones.com and watch for the next time the doors open to join.

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