This week, I’m talking about 5 mistakes that smart investors don’t make in bear markets. 

In today’s uncertain world, cash is king. The turmoil in the stock market has been dominating the headlines, but even the typical safe haven hideouts for investors during times of crisis - namely bonds and gold - are showing sign of stress as well. 

A mistake that too many investors make heading into times of crisis is that they don’t have enough cash. There are a couple of different applications to this, so let me explain: 

First of all, if you’re retired and you’re relying on your portfolio to provide income, one of the best ways you can prevent further losses in your portfolio during market downturns is by having cash on hand, so you can suspend those portfolio withdrawals. 

Most Americans, even financially savvy Americans don’t have enough cash on hand. In fact 40% of us could not even cover a $400 emergency without putting it on a high interest credit card. 

But by having 6, 12, or 18 months of your income needs covered by cash, you can weather the market storm much better, especially when you’re retired. 

The second reason why you need to have cash on hand is so you can pick up bargains and take advantage of opportunities in times of crisis. For every panicked phone call I’ve received over the last week, I’ve received another call saying “Ashley, I have $10,000 or $100,000 or whatever it is sitting in my bank account right now, what do you recommend”. 

That’s what cash does - it allows you to capitalize on the chaos. That’s how the wealthy think. That’s what Warren Buffett did in 2008. He called the financial crisis of 2008 an economic pearl harbor. He made investments in struggling companies like Goldman Sachs and General Electric, and his investments paid off big, earning him a profit of $10 billion on those investments in just a few years. 

If Buffett was saddled with debt or fully invested and forced to sell other assets to make those investments, he wouldn’t have been able to buy in the first place. But because he had lots of cash on hand, he could jump in and take advantage of opportunities that existed in those dark days of the Fall of 2008.  

So remember, cash is king in times of chaos and it’s important to have a meaningful amount on hand so you can protect yourself and take advantage of opportunities. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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