The sky is falling. The sky is falling.
All as we enter another round of crippling financial chaos. But don’t panic.
Easier said than done.
But remember, markets are resilient. We’ve come back from far worse. If you panic, you sell. And if you sell, you miss the potential for the recovery rally. We have to remember that markets are resilient and eventually recover, as they have historically. In fact, look back at the history of bad moves and you’ll see that each time they were followed by a recovery rally.
Two, take some advice from Warren Buffett.
In a 2016 annual shareholder meeting, the billionaire suggested that dark clouds would fill the economic skies and they would briefly rain gold. “During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted,” as quoted by MarketWatch.
Three, get defensive.
When the economy goes down the toilet, remember that millions of people still need to eat, brush their teeth, go to the doctor, use the bathroom, heat their homes, pay for utilities, and in some cases, buy alcohol to make the recession less stressful. That includes stocks like 3M, Colgate-Palmolive, Coca-Cola, Pepsi, the list goes on.
And four, always be prepared for volatility, especially with bank failures. We can do that with volatility-based trades, which we’ve mentioned in previous articles. These include:
ProShares Ultra VIX Short-Term Futures ETF (UVXY) — The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
iPath S&P 500 VIX Short-Term Futures (VXX) — The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index.
ProShares VIX Short-Term Futures ETF (VIXY) — ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.