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Last Tuesday seems like a lifetime ago. But that was the day I sent a Smart Money report that opened with these two sentences: “Stock market routs are miserable events. They sow widespread financial pain and suffering … along with a heaping dose of anxiety.”
Over the following days, we discovered just how miserable these events can be, as the Dow Jones Industrial Average plummeted about 5,000 points and all the major averages dropped into an official bear market.
So, what now?
Most likely, the major averages have not yet reached their bear market lows. Based on probabilities, the stock market averages will drift even lower than they are today and will reach their ultimate lows a few weeks or months from now.
That said, the stock market is not one big monolithic creature. It is a market of stocks. Even if the S&P 500 does not bottom out immediately, many individual stocks will.
“Best of breed” stocks, in particular, tend to bottom out first, and then move higher while the rest of the market is languishing. And because we investors rarely get the opportunity to buy best-of-breed stocks on the cheap, we should be looking for the opportunity to do that — starting right now.
As I said a week ago:
“Stock market selloffs are the extreme events that create opportunity. They produce the panic selling and ‘washouts’ that usually offer great moments to make savvy long-term investments…
History tells us that moments like these are what buying opportunities are made of. So if you have the stomach for it, do a bit of buying over the next few weeks … while others are fearful.”
It’s now time to put this philosophy into practice.
Buying Forever Stocks in the Worst of Times
I don’t think it’s too early to begin moving into stocks that you hold through good times and bad. Think of these investments as your core holdings. Treat these Forever Stocks as your “Elite 8” or “Top 10” — or whatever number you decide on.
In total, these stocks should represent about 25% to 35% of your total portfolio.
