These are strange times, a recession the type that has not been witnessed in living memory unless you were alive during the great depression of the 1920s. Economic Meltdown Blues.
It was a disaster foretold, an accident waiting to happen. The handwriting was on the wall. Closer home to Nigeria, the bulls were on a rampage in the stock market. Stocks of moribund companies sprang to life. Every stock became a winner. PE ratios shot to the sky. Everyone became a winner in a free for all buying binge. Folks ran out of cash to invest and went to the banks for more. The economy was at the sick bay while a party was going on in the stock market.
Then came the crash. Foreign investors were the first to make for the door. There is no consensus on what happened next. The buck is still being passed between CBN, SEC, NSE, and the banks. Smart investors pulled out their money while the newcomers were left with the tabs.
The crash was devastating. It was a man-made disaster. The dust is still settling. The extent of the final damage is yet to be determined. Trillions have been lost so far by investors. Lives have been ruined. In some cases fatally.
The question now is what is the way forward for small-time investors?
The damage has been done. There is no point crying over spilled milk. After a fall, the logical next step is to wipe off your tears, rise up, brush off the dust, learn the lessons, and move on. Life goes on. Success is never ending and failure is not final until you give up.
Lessons from the economic meltdown
There is a treasure trove of lessons to learn from the stock market meltdown. Lessons on investing in the stock market, using stocks as a tool to attain financial freedom, or retirement planning.
You first of all have to go to school to become an engineer, doctor, teacher, or whatever vocation. One cannot just wake up one morning and start practicing. You have to know what you are doing. That holds true for investing, being in stocks, starting your own business, real estate, etc.
So the first step is staying where you are, and going back to school. Don’t panic into selling your stocks for peanuts. The market goes up and down. That’s its character. We have not seen this type of down in living memory, but that does not mean it will stay down forever. Most of the stocks are selling below their fair value.
Returns on investment at times like this, if revenues hold firm relative to last year’s figures, are quite high. PE ratios are at rock bottom. It is at times like this, when traders run screaming out of the market that value investors rush in to pick up blue-chip stocks on seasonal sales, buy one, get two free.
When it is obvious that the market has bottomed, the rush to pick stocks at low prices will begin. Gradually, the Bulls will stage a comeback. Those that panicked and offloaded their stocks at rock-bottom prices will regret it. If you hold it right there, as the market gradually recovers as value investors return, you will get to recover some of your losses and gain valuable lessons in the process.
Restrategizing
Winter is a time of introspection. A time for re-strategizing and staging a comeback or changing direction. There is a world of difference between a trader and an investor. You need to choose your path and study to have a full understanding of your next move.
Financial freedom is not about capital gain, as desirable as it is. It is not about wealth accumulation. Financial freedom is about who you need to be on the inside in order to become who you were born to be. By the time you find your grove, occupying your position in the scheme of things, money will naturally flow toward you.
Your recent loss may very well turn out to work out in your favor. Success is not attained by never failing, but by rising each time you fall. A fall offers more lessons than success. A job loss may be a signal that it is time to start your own business. If you have only one source of income, it may be a signal that it is time to switch to multiple streams of income. Failure is a learning point. A time to pull over and find out what went wrong.
If you learn the lessons well, you will come out flying higher. If you choose to dwell in the valley of self-pity, you will slip deeper and deeper into depression. Your response to this setback will determine how far you will go. This is just a storm. This too shall pass
