Anyone involved in the stock market in the last two years has seen market valuations skyrocket nearly across the board. But as many economists warn, the market has never been designed to go up forever – and a large correction might be just around the corner.
Fortunately, there are ways to prepare for the eventual market downturn, which means that while the correction may result in losses, you can avoid the pitfalls that are awaiting many investors. And according to Goodstein Wealth Management’s Matthew Murawski, some of the greatest damage is done in the leadup to a crash rather than the crash itself.
“I have seen more wealth destroyed in waiting for the crash than I ever have in any kind of crash or correction,” Murawski says.
Part of that is due to panic selling – when famous investors like Michael Burry, Leon Cooperman, or Jeremy Grantham appear on television and say that a market crash is imminent, investors move quickly to liquidate their investments and hold onto cash. But that is not always the best decision, Murawski explains.
“Jeremy Grantham had a great quote in January 2021; he said the market is a full-fledged epic bubble. And then last year, the S&P did 26.9%,” Murawski says. “If you had listened to them last year and that the market is in this huge speculative bubble and we are due for an epic crash, you would have missed out on a 26.9% year in the S&P 500.”
And it is not only Grantham who has been predicting a massive downturn in the markets. Other leading names, including Robert Kiyosaki, have been calling for a market crash for the past year.
For Murawski, these types of predictions only exacerbate the problem for investors who lack the experience or industry knowledge to separate fact-based analysis from wild speculation.
“Some of these people that have huge names can go on television and make these huge predictions, and they can spook the market,” Murawski says. “When you make bold predictions like this, a lot of it is just to get in the press. These guys can tell you that the biggest crash ever is coming, and a week later, they are there in the market.”
As Murawski points out, eventually, one of the predictions will be correct. However, these types of bold forecasts warning against a massive market crash do not educate the public – they serve only to scare people into panic selling.
“We are due for a correction,” Murawski says. “But that is not advice to try to time the markets.”
A market correction of 10-20% would be a natural part of the cycle, not a cause for mass panic and making rushed financial decisions. The problem, however, is that people trust the big names in the media.
“Most economists are not accurate in market timing,” Murawski says. “Very few of them have ever been able to do it even remotely reliably.”
So, if a market downturn is inevitable – but we don’t know when it is coming – how can investors position their investments to reach their wealth goals?
Murawski recommends a measured, balanced approach. Instead of reacting to every news release from big-name investors, you should ensure that your investment portfolio is diverse to withstand corrections to the market.
And whatever you do, Murawski says, do not panic. The crash may be coming, but with the right preparation, investors can adapt and even grow through the downturn.
“We are due for a pullback, but this year could turn out to be a nice year as well,” Murawski says. “The bull market doesn’t have to end just because we have had a couple great years.”
Matthew Murawski is a financial planner with Goodstein Wealth Management. He provides personalized wealth management advice to the firm’s 401(k) clients as well as his own individual clients. Murawski educates investors to help position them for long-term financial growth.
To learn more about Murawski and Goodstein Wealth Management, visit www.goodsteinwm.com or connect on Facebook, Instagram, and Twitter.
Sources :
https://www.yahoo.com/video/robert-kiyosaki-just-warned-giant-130000215.html
