A July 28, 2018, Wall Street Journal headline states “Investors Step Back From Social-Media Highfliers”. It points out that Facebook’s drop of over 19% is the biggest single-day drop in US market history!
How did that momentous event affect Monday Morning Millionaire Program members?
This is an excellent time to review the seven habits of highly effective investors.
- Having an early, disciplined savings program
- Self-directed (do-it-yourself) investing
- Buying the entire US market
- Buying and holding
- Buying low, selling high
- Having cash most of the time
- Avoiding complexity
Note habit number three, shown in bold. Monday Morning Millionaire Program members do not pick stocks in their core portfolios. Instead, they buy an exchange-traded fund (ETF) to track the S&P 500 market index which is a good proxy for the entire US economy. Examples are the S&P 500 ETF (symbol SPY), Vanguard S&P 500 (symbol VOO) and the iShares S&P 500 (symbol IVV).
In the answer to a question posted on “The FAANG stocks themselves really are insanely valued, but they make up only 5% of the S&P 500. If they lose 100% of their value, the S&P 500 will drop only 5%.”
Since that time, just over one month ago, the FAANG stock valuations grew to 10% of the S&P 500 -insanity doubled! However, the biggest single-day drop in US market history resulted in an S&P 500 drop of just over 1%! In other words, a momentous, adverse historical event has had almost no effect on the portfolios of Monday Morning Millionaire Program members.
In order to enact habit number five, buying low, selling high, members wait for a drop of around 10%. Unquestionably, that day will come even though no one knows when. Members are on the lookout for it.