How To Focus When The Stock + Crypto Market Get Volatile
Investors have been looking at both the Stock and Crypto markets a bit differently lately due to the volatility. I get it. It’s all over the place. Like I wrote in a recent email to my community, ‘we’re in a forest’. What I meant by that was - we are witnessing some of the most interesting times as an investor ever in history. It’s already hard to get people to start investing and now we have to add inflation, a pandemic, layoffs, a mixed housing market, a war, this volatile market along with a clusterf8ck of things to this mess. Even those that are vets to investing haven’t been able to configure their strategy when it comes to where this is going.
In the scroll of social media, we see talks of a bear market, crash, sell-off and correction all within a week’s time. Make it make sense, right? No one can, Beloved. While many are calling these unlimited unprecedented times a copy of March 2020 or the recession of 2008. Many aren’t looking at the 1970-1973 span of the economy/ stock market. Granted, Crypto wasn’t around then, but I’ll get to that shortly. Back that ‘70 show had inflations high af (that’s the highest previously since what we’re seeing currently) along with jobs/supply chain issues. No pandemic, but there was another pandemic going on when it comes to The Culture. Yet, when it comes to analyzing spans in the economy, I use them as cliff notes on how to prepare – not a GPS. The reason for this is because the route we are driving on is different. The exits aren’t the same. And we don’t know the designation and how long it will take to get there. Yet, using the cliff notes will allow us to better prepare for what’s to come due to the uncertainty.
Let’s pause to give some insight into what a “Bear” and “Bull” market is, respectively. A Bear market is usually when the market or sector declines 20 % or more from a recent high for a prolonged period of time. Typically most call it that after a couple weeks, close to a month. We normally see this called when the major indexes like the S&P 500 or Dow Jones are tumbling more than normal. But why do I say that this bear is different? Because we are seeing the bear peep its head out consistently within both markets at the same time. And a Bull market is the opposite, when you see a sector, index or overall market on a 20% incline for a stretch of time. With both, you have to be comfortable with this ending without moments notice and knowing how to move accordingly.
And when it comes to Crypto space. I felt that this cold cycle or bear market could come around this time and last until the Fall of 2022. While we can see small rallies, there will be major building during the bear. From Layer 2, Play-to-Earn and Ethereum 2.0 and more - this confirms my theory. Oh, how I forget the amazing traction we are seeing when it comes to Polygon. BUT we are also seeing more corporations starting to adopt Cypto payments to their roadmaps along with NFT integrations when it comes to personalization (membership, products, etc). And how can we not forget the oncoming of regulation to come. While we don’t know the depth of what it would look like, we know it's coming.
While we have this coming, two of the major misconceptions I’ve seen for both markets have been: Stop saving, only invest. Dump all of your holdings (Stocks + Crypto). Both are volatile moves themselves. Talked about this here.
No matter if the market is sweet or sh*t, you should always strive to stack/save. You should save for reserves (no one saw this pandemic coming along with layoffs are happening) along with opportunities. You know that volatility we are experiencing? Depending on your risk tolerance, research and position - this could be prime time for you to flip while the markets are a mess. Just saying.
Some are calling for a recession soon, but technically… We never recovered from the pandemic, which gave us recession level stressors. And by definitions - it was a recession. I talked about it a while ago. Many were calling for a L, V or W recovery – guess it was a Ghost one. And we rode it (if you know the E40, you get the reference).
Another major thing I’ve drilled like a beat over the last 14 months or so was churning your diversifications to fit not only your goals, but to work WITH the current economy we are in. Most investors have their holdings (Stocks + Crypto) heavily within one sector or utility. Which I get, but during uncertainty. It’s good to not only add balance, but watch for what sector/utility is holding value during the volatility to determine your middle hold. It’s what’s going to hold the gang (your portfolio together). This churn that I speak about is also called “Sector Rotations”, which can be applied to Crypto as well.
Investopedia defines it as “the movement of money invested in stocks from one industry to another as investors and traders anticipate the next stage of the economic cycle.” Which is what I explained above but in more relatable terms. Many might try to say things are predictable, but at this time - certain elements aren’t. Yet, you can look to gain perspective on how to position your portfolio to have the appetite to handle the sweet and shit of the moves.
While you aren’t supposed to watch your portfolios (and even retirement) all the time, do set time to make sure that they aren’t heavily dependent on one sector/utility/security. I would say to watch for the moves in the Sweet or Sh*t of the economy to know if you need to Shift your diversification. But still lock in on your overall financial objectives.
On the Crypto side - I talked about not only the cycles but also the volatility of this market over on TikTok, but be mindful of the options that you have to invest. While I say only invest what you can stand to lose, also lean into my rule of it being 1-3% of your overall portfolio until you learn and leverage it. Plus, you have the strategy + stamina to handle it all. Then you can increase your exposure. Here’s one of my favorite Crypto platforms to track movement of the markets.
Don’t let the volatility of it all make it void you out of investing in general. Just look to see what you’re doing and how to lean in what’s to come. Expecting it to be an interesting road, but you along with your portfolio will be fine.