Regardless if the U.S. is entering (or already has) a recession, there’s no question we’re facing some tough economic times. As a result, people are saving more, corporate profits are lower and the near-term future is bleak. This all translates to a declining, volatile stock market.

It’s more important than ever during these times to not follow the crowd if you have a long-term investment horizon. As people reduce or stop investing all together, you should be continuing to buy during a recession. This is the time that prudent investors build great wealth.

Sure, the short term may not be pretty, but stocks are cheap and the American economy will survive. Nobody can accurately predict a bottom of the market no matter what online finance degree or knowledge they possess, but you also know that by regularly investing, and you want to be sure you are part of the rebound.

Since the bottom cannot be predicted, it is important to stick to your investment strategy. Remind yourself why you are investing in stocks. You know stocks are volatile, you know there is a potential to lose money, but you also know that by regularly investing in a diversified portfolio you will build great wealth over time. That’s because the stock market always prevails.

As William Bernstein, Financial theorist and author of “The Four Pillars of Investing: Lessons for Building a Winning Portfolio,” states:

If you think about it logically, you are rewarded for owning stocks precisely because they are risky; the dicier things look, the more money you can expect to make in the long run.

Now more then ever you want to stick to your investment plan. If you are a long-term investor, keep investing regularly and stay diversified to protect your downside. You don’t want to look back years from now and realize you missed the opportunity of a lifetime.

Millionaire Money Habit: Hundreds of studies show that you can’t accurately time the market, but you can take advantage of a cheap market. Outsmart the average investor by taking advantage of the great buying opportunities that are created by fear and uncertainty in the market. -RT
photo by fyuryu

I was having lunch with a friend of mine the other day and naturally we got on the topic of personal finance and wealth. He was very proud to tell me, “I’m going to break six figures this year.”

“That’s fantastic,” I said. “How much more are you going to make next year?” He looked at me a bit puzzled, so I continued to explain one of my philosophies to building wealth.

A good business analyzes and prepares growth initiatives, increases income, reduces debts, and strives to outperform the previous year’s earnings and expectations. During your wealth-accumulating lifetime, you should treat yourself the same way. After all, the company you work for doesn’t want to make the same amount of money next year, so why should you?

Just as the company you work fights to the bitter end to earn more money year-over-year, you should ultimately be concerned with your bottom line, i.e. how much money is the “business of me” generating. This means while working to perform well in your current environment, you should always be thinking one step ahead and asking, “What’s next? What do I have to do next year to make more money?”

So, what are some ways you can make a few extra bucks? The first step is to right it down along with your list of goals. Make it a priority to sit down and think about how much you make and what you realistically want to make next year. For example, if you make $50,000, write down you want to make $60,000 next year. That’s a 20 percent increase, which can be a significant increase in salary, but is certainly a reasonable goal.

Once you have set your goal, map out a strategy on how you plan to get there. Here are some examples:

• I feel I am underpaid and will negotiate a raise in order to be paid what I am worth.
• I will pursue a promotion.
• I will start a part-time, home-based business doing “x” to generate extra income.
• I will increase sales by at least “x” percent this year.
• I will polish my resume, interviewing skills and network to land the job of a lifetime.

Consequently, by doing this exercise, and taking it seriously, you will be more successful in your career as the drive to succeed will be reflected in your work.

How much are you going to increase your income this year and how are you going to do it?

Millionaire Money Habit: One way to help you accumulate more wealth, more quickly is to increase your income and cash flow. Regularly stop and assess how you can increase your income in order to put more money work to for you, but remember to do some personal branding along the way. -RT

It’s been nice to see the stock market hold its ground and have some pretty good days lately, but I opened my mail last week to find my quarterly statement that summarized my portfolio. The first thing I noticed was that my investments had almost dropped 8% this past quarter it was hard to stomach. How did you do?

Even though this was to be expected, it does not make it any easier to look at the big red, negative number. But this doesn’t change a thing about my long-term outlook and confidence in the stock market. From the research I did on Buying the Housing Slump, it’s proven that a diversified portfolio generally beats real estate investments and is a reliable strategy to increase your net worth.

Did you know that the stock market has never produced a loss in any given 15 year history? That means that based on historic data there is a 0% chance in losing money when investing in the stock market. What other investment can return an average 10% return without any historical risk.

So while it is not easy to look at my financial statement and subjectively convince myself that it is a good idea to keep investing, I know objectively that this still is a great a time to invest. The market is unpredictable, and it is generally just a few key big performing days that make one’s portfolio profitable in a given year. So for now I am going to continue to take advantage of the short-term volatility and keep investing on the down days in order to be “in” the market when the rebounds occur.

If you are having trouble being “in” the market, remind yourself why you are investing. You know there is short-term risk that allows stocks to be a good investment, you know that over time your portfolio will be profitable over time, and you know that compound interest will make you rich. If you are selling simply because of panic, all you are doing is locking in your losses now.

As Robert Arnott, founder and chairman of Research Affiliates, states:

The way to respond to this kind of market is not to ask yourself, ‘What do I do to make money in the next three months?” but “What would I want my portfolio to look like over the next 30 years?

Take advantage of the opportunity to buy cheap investments while you can. Opportunities like these only happen a few times in a lifetime. This is when the rich become ultra wealthy.

Millionaire Money Habit: Ignore the short-term performance of your portfolio, and remind yourself why you are investing in the stock market. Now more than ever it is important to stick to your investing rules and invest in a properly balanced portfolio. -RT
photo by El Gran Dee