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People Who Make Their Own Luck

Martin Hawes believes luck is when preparedness meets opportunity. After all, why let a good slump go to waste.

30 November 2022

Wealthy people are lucky. This may seem a strange thing to say: most people would probably think that people become wealthy because they work hard, research financial options, make smart decisions and take on risk. All of these things are helpful, but in my experience, luck is a big factor for financial success.

Now, before you bombard me with emails in disagreement, it is important to understand my definition of “luck”. I believe that luck is when preparedness meets opportunity. I do not think luck is simply about some kind of karma or fluke, a cosmic roll of the dice. Instead, it is being prepared for opportunities that arise. When you think of luck as being ready for opportunity, there are certainly people who make their own luck.

I once read a study that showed many people became wealthy because they were cashed up and invested at the time of a major market crash. That meant they were prepared (they held some cash) and were ready to invest.

Although many people see the current economic, political and market situation as a scary threat, I think it better to see it as an opportunity to buy investments cheaply. Crashes like these present great opportunities to profit.

At the moment and in just about every asset class, investment values have had quite major slumps. Just about everything you might invest in (shares, property, bonds, cyber currency, precious metals) are falling in value. And most of them look like they will fall more.

Fear or opportunity?

Different people react in different ways to these kinds of events – some endure them, and some enjoy them. Endure or enjoy depends on preparedness.

This preparedness is partly about whether you have some cash to take advantage of the slump but, more importantly, it is about the way you think about and react to such a market fall. This is really about whether you see a market crash as something to fear or as an opportunity.

I have lived and invested through five major market falls: the 1987 crash; the dot-com crash; the GFC; the Covid crash and now this. My experience is that markets recover in time, barring the odd, unusual event (e.g. the Japan crash of 1989). Within a few months or years, markets have risen strongly again and that makes those prepared to enjoy a crash much better off.

I know that buying at a time like this is not easy – during a crash it seems like the world is going to hell in a hand basket. There is a wall of negative noise coming out through the media; noise that is dire enough to make anyone think the world is about to end. That is scary and means a lot of people are not prepared to invest.

There is an old investment saying that you should buy in gloom and sell in boom. However, in my experience people commonly do exactly the opposite: they buy when markets are booming (because everyone is talking about the profits they are making) and then they sell when markets turn bad (they get frightened and are rattled out of the market).

Using dollar-cost averaging

However, these slumps (including the one we should be enjoying at the moment) can be seen as opportunities. If you invested through this current market fall it seems most likely that in five years’ time you would be very pleased with the outcome.

Of course, we cannot be sure exactly when this slump will bottom out (no-one rings a bell to tell you when the absolute bottom has been reached) and those who try to invest at the very best time are likely to be disappointed. Perfect timing of a market is impossible.

The answer to this timing problem is to not even dream on hitting the absolute bottom but instead use dollar-cost averaging. Dollar-cost averaging means that you drip feed money into investments over a period of time – i.e. investing for a few months when markets are generally down.

Personally, for the last couple of months I have been making regular contributions into one of my investment accounts, taking the opportunity to profit from the turmoil of the markets by buying in while they are cheap.

I think you should get lucky by being prepared to take the current opportunity. In spite of what you read in the media, you should take an optimistic view of the longer term future and have the courage to invest when everyone else is selling. Don’t let a good slump go to waste.

Martin Hawes is a financial author and speaker. He is not a Financial Advice provider nor a Financial Adviser. Information contained in this article is general in nature and is not intended to be financial advice. Before making any financial decisions, you should consult a professional financial adviser. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.


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