By Zach Scheidt
This post Three Lessons from Hurricane Harvey appeared first on Daily Reckoning.
The shocking images and stories from Hurricane Harvey continue to pour in…
This weekend, I saw a picture of an assisted living home where residents were up to their waists in flood water.
I also heard about three different prisons that had to be evacuated. I can’t imagine the logistical nightmare of arranging transportation for these individuals ahead of the storm.
And then there was the Sheriff’s deputy who was stuck in her home, with flood waters rising, and a three-month old baby sitting in a car seat on the kitchen counter. That family had to be rescued by neighbor’s giant tractor combine!
As our nation sits riveted to the massive storm Mother Nature has served up, I’m reminded of the danger of an economic storm on the horizon.
Today, I want to share three key takeaways from Hurricane Harvey… takeaways that could go a long way towards protecting your wealth from a stock market hurricane…
Takeaway #1: Research & Understand the Risks
The National Weather Service, along with relief organizations like The Federal Emergency Management Agency (FEMA) have built extensive databases that help to predict the severity of specific storms and the aftermath that could occur.
By understanding the risks, who could be affected, and where the worst flooding will occur, these agencies can give residents an accurate picture of the dangers they face.
By a similar token, we can look at data on financial markets and understand more about the risks investors face.
For example, today’s market features some significant risks that are easy to see if you know where to look.
Traditional investors are infatuated with stocks like the FANG group (Facebook, Amazon, Netflix and Google), and they’re also willing to put massive amounts of capital into index funds — regardless of the price. This leaves many popular stocks over-priced and vulnerable to a sharp decline.
If you understand these risks, you’re much more likely to have a plan to avoid losing money when the next economic storm hits. Which brings us to our second takeaway…
Takeaway #2: Have a Plan, and EXECUTE that Plan
This weekend, we heard horror stories of people who didn’t have a plan and wound up trapped by Hurricane Harvey.
But what we’re not hearing about is the hundreds of thousands of stories of residents who got out of harm’s way and are now sitting in a dry place waiting out the storm. These are the people we want to emulate during the next economic hurricane.
Experienced investors — the ones who have survived previous market storms — will tell you that it’s extremely important to have a plan for what to do when the market trades lower.
And just as important, is the ability to execute that plan.
It takes a lot of discipline to sell overpriced stocks even when they continue to move higher… or to buy precious metals and other “safe” investments even when they are out of favor. But that’s exactly what smart investors are doing right now to protect themselves …read more
Source:: Daily Reckoning feed
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