The older I get older, the faster time seems to fly. As a kid, our summer break seemed like an eternity of fun and games. Now, I blink, and another six months have already flown by.
With COVID-19, many are scared and worried. I think most of this comes from the uncertainty of when things will normalize and who will be affected. Will it be your family or even you?
History tells us that when the crowd goes in one direction, it’s important for us to go in the other direction. That’s because the mob is rarely known to do the right thing.
While most of us would like to believe we dare to stand by our convictions in any situation, most of us will tend to follow the herd. The fear is that if we stand still, we’ll get trampled. Better to move with the herd we rationalize, but history is rife with examples of questionable mob behavior.
Once rational individuals suddenly lose their minds when they become part of a mob and collectively end up doing irrational things they regret later.
The latest example of questionable mob mentality is the massive sell-off in the stock market. In just a little over a month, the market has shed more than 30%.
The worldwide death toll of COVID-19 is around 10,000, while the death toll of the current flu season in just the U.S. alone is over 22,000.
The flu has never triggered a near recession, but why has a flu-like virus with what many consider milder symptoms caused such panic?
Herd mentality is the simplest explanation. We’ll all look back on how we all reacted to this pandemic and ask ourselves, “What were we thinking?”
Many shrink in the face of disasters like COVID-19 and its shock to the Wall Street system, but those who decide to face the disaster head-on may find opportunity when everyone else is running the other way.
While many withdraw and sit on the sidelines, the winners will be the ones running into the game – flying in the face of danger.
“In the midst of chaos, there is also opportunity.”
― Sun-Tzu, The Art of War
Here’s my advice.
After the chaos, uncertainty, and fear subside, it’s only then that those who have been sitting on the sidelines decide to get back in the game when the rest of the herd decides to come back. But we all know that’s often too late.
Investors who sell-off in freefall then only reenter the market when it’s safe will never fully recover their losses. That’s the danger of following the mob.
If the mob is moving in an irrational direction, then the only rational thing to do is to go in the opposite direction.
Warren Buffett himself stated, “Be fearful when others are greedy, and greedy when others are fearful.” Today, as the world is gripped with fear, I guess it’s time to be greedy.
It’s time to be a contrarian. Buy when others are selling and sell when others are buying.
Contrarians not only buy when others are selling and sell when others are buying, but, in many cases, they’re buying up assets mainstream investors aren’t even considering.
Wealthy contrarian investors look for two things in a downturn:
- Long-Term Alternatives.
No better time to find bargains than in a seller’s market, but what about #2? Long-term alternatives?
You can’t find those in the stock market. Nope, that’s why they are called alternative investments. They’re found on private markets, insulated from Wall Street. And therein lies their appeal.
Long-term alternative investments with 10-15 year lockdown periods are built to deter mob mentality and, as a consequence, Wall Street volatility.
Long-term alternatives serve two purposes:
- To shield portfolios from Wall Street volatility; and
- To provide a consistent income stream – even in the time of madness.
The world is on fire, but if you don’t blink and run towards the fire, you may find what many contrarian investors have discovered before you – wealth.
Avoid the mob and explore private alternative investments that are recession-proof and provide higher risk-adjusted returns than the stock market.