You Should Be Glad The Market Flash Crashed…
That’s how far the Dow Jones Industrial Average fell on Monday before rebounding a bit into the close.
Investors freaked out — even the professionals!
Just for a little comedic relief, I flipped on CNBC in my office to see how the talking heads were handling the crisis. And true to form, most of them were yelling questions at each other with very few answers for investors.
Yes, the Dow’s drop was surprising and unsettling. Yes, it was hard to pinpoint an actual reason for the decline. Yes, the “flash crash” has introduced a lot more uncertainty into the market.
But despite what you may think, this is actually good news for you and your investments.
Today, I want to talk a bit about how the flash crash and the new stock market can actually help you grow your wealth more effectively…
A Market of Stocks vs. a “Stock Market”
People are blaming the sharp decline in the market on several things:
- Higher wages leading to inflation fears
- The FBI memo release, adding political uncertainty
- Computer trading triggering massive sell orders
- The start of Jerome Powell’s term as Fed Chairman
- The Patriots losing the Super Bowl (I’m not kidding!)
Some of those reasons make a bit of sense. Some of them are laughable. But the bottom line is that the market sold off because of a number of factors. Yet the underlying strength of the U.S. economy is still very much intact. And that’s good news for investors.
Instead, one of the hidden reasons the market briefly crashed this week ties back to a lazy shortcut most investors have been taking.
For years, people have been told that “passive investing” is the best way to grow your wealth. Passive investing simply means that you invest your money into the “stock market” by buying an index fund. That fund typically uses your money to buy the biggest stocks in the market, naturally driving “the market” higher.
Passive investors give no thought to which companies are actually growing profits and which companies have good business models. Instead, their money is blindly plowed into the most popular stocks, driving them higher and higher.
This is a terrible environment for smart investors, because all of these passive investors are simply overinflating the prices of popular stocks and neglecting the stocks of good, solid companies that fly under the radar.
Then these passive investors helped make Monday’s flash crash even worse.
The biggest and most popular stocks fell as panicked investors tried to get out of the market and computer programs naturally sold the easiest stocks to trade.
Following the flash crash, you can bet that people will be less comfortable with “the market” as a whole and more interested in picking out specific stocks.
I love this shift in the market.
Because going forward, people are going to be paying a lot more attention to the merits of individual stocks, instead of investing blindly in “the market.” And that creates a lot of opportunity for those of us who are on top of the best trends and specific opportunities in play.
Today, I recommend looking through some of our recent Daily Edge alerts to find specific stocks that we’ve covered. For any of them that have significant discounts following Monday’s flash crash, consider buying shares to take advantage of the “on sale” prices.
That way, as investors start moving money out of passive investments and into the best market opportunities, you’ll already be set to profit from the rebound from these specific stocks.
Collecting Instant Cash from Volatility
There’s one other opportunity I want to highlight as a result of the flash crash.
You see, with stock prices gyrating wildly, measures of “volatility” have been rising. And while this may not sound like a good thing on the surface, it actually creates a special window of opportunity for my favorite income strategy.
When volatility picks up, prices for option contracts also move higher.
(The term “options” may sound complicated, but these are simply financial contracts that trade on special exchanges just like stocks. If you know how to use options correctly, you can make a lot of money in a very reliable way.)
I call this method my “perpetual income strategy” or “instant income” because you can continually collect instant income payments from the market.
While you can use this strategy to generate instant cash literally any time the market is open, the amount of cash that you can get increases during market environments like this.
My Income on Demand service shows readers exactly how to collect these income payments. And today, those payments are much higher thanks to the higher volatility in the markets.
To show you just how this volatility helps to boost our income payments, I want to highlight the weekly cash that we’ve collected so far this year. Here are our verified figures for this strategy so far in 2018:
- 1/3/18 — ArcelorMittal (MT) Payment: $249
- 1/9/18 — KB Home (KBH) Payment: $327
- 1/17/18 — Diamond Offshore (DO) Payment: $325
- 1/23/18 — U.S. Steel (X) Payment: $452
- 1/30/18 — Square Inc. (SQ) Payment: $598
- 2/6/18 — Advanced Micro Devices (AMD) Payment: $621
See how the last two payments increased — more than doubling the weekly cash we were collecting early in January? That’s due to the higher volatility in the market!
The strategy we use to collect this cash is quick and easy. In fact, my boss recently challenged someone to a race… He tried to pull money out of the market faster than someone can pull money out of an ATM.
You can see what happened in our online demonstration here.
As you can imagine, I’m excited about the current market and about collecting larger income payments. I’m excited about the new opportunities that this dynamic market is creating. And I invite you to come along and try your hand at cashing in on this investment trick.
Again, you can check out the demonstration and see how you can use the method in your own account here.
So next time you turn on the TV or check your brokerage account and see that the market is trading lower, remember that this is actually a good thing for investors who know how to take advantage of the volatility.
Here’s to growing and protecting your wealth!