by Stacy Francis, CFP®, CDFA
Yesterday, I had lunch with a colleague I met while I was working at a boutique Wall Street firm. She still works on Wall Street. The restaurant we chose is usually near impossible to get into, so we were positively surprised when we were able to reserve a table. Once there, however, we realized that we needn’t have worried about availability. The place was as deserted as the plains of Siberia.
My colleague informed me that this is what Wall Street is like these days. The investors have fled the field, no one has any money, and few people meet up for three-course lunches at high-end restaurants. While it felt kind of sad, seeing one of the most popular places downtown so empty our conversation created an echo, it is important to remember that there is a negative and a positive aspect to everything. Because when no one else is investing and everyone wants to sell, stock prices – and thus prices for mutual funds invested in stocks – are pressed to the floor. In other words, if you have money, this is a golden opportunity to buy. The lower the prices, the smaller the downside, and the larger the potential upside.
The majority of investors buy when prices are high – when markets have been performing well for a while, and sell when prices are low – usually in the middle of or immediately following a crash. Those investors will never make any money. But on the other side of every bad trade is an excellent one. If you have nerves of steel and can bring yourself to buy when everyone else is selling and sell when everyone else is buying, you can be the one creating excellence – not to talk about wealth