Two Kinds of Down

Friday I told you I feel relief when the market falls. And I left you hanging on the only question that matters. How. How do I sit through the exact thing that nearly ended me at twenty one and feel anything but sick.

Here is the answer, and it turns on something almost nobody separates.

There are two kinds of down. People feel both as the same fear.

One is the whole market falling. Spread across a huge number of companies, all at once, the way it does every few years. In the US, that kind has always come back so far. Given enough time it has gone on to make new highs. That is history talking, not a promise, and nobody can hand you a promise. But if you are spread out and you have room to wait, that kind of down is much less of a threat to you. It can be a sale.

The other kind is one company falling. A single company owes you nothing. Some drop and climb back. And some drop and simply never do.

I know that second one from the inside.

The stock I put everything into at twenty one fell almost completely. Around ninety nine percent. And it never came back. The company that carried that name eventually stopped carrying it, got folded into something else, and the ticker I used to check every single day is just gone. No amount of patience brought that value back.

One kind of down is a dip. The other is a disappearance. And you cannot tell which one you are living through by how scared you feel, because on the way down they feel identical.

So which kind are you facing? Less of it is the market than you would think. Most of it is you, and where you are standing when it hits. The people who take the lasting kind of hit usually have one or both of two things going. They are forced to sell, or nearly everything they own is in a few names. Put the two together and a paper dip turns into money that is actually gone, because they had to sell real shares at the bottom to cover something that could not wait.

That was me, and you already know the shape of it. Everything in that one stock, bought with borrowed money, with margin calls selling me out on the way down. The market dropping did not wipe me out. Owning one thing, on borrowed money, did.

Take those two things away and the same fall becomes something you can wait out. Spread out in a sensible way, with nothing that can force your hand, you ride it down and, if history holds, you ride it back up. Maybe that takes five months. Maybe it takes five years, or longer. No one can tell you which, and if you cannot be forced to sell, it matters a lot less. You do not need a stack of cash on the side to do that. You need enough cash and income that you are never the one who has to sell.

But just getting through it was never the point for us. We do not just sit through a down market. We get a little excited, and not because we are brave. Many of us spend less than we make, with cash piling up month to month and more of it landing in bonuses and payouts through the year, so there is usually money coming in that needs a home. When the market drops as a whole, the things we would gladly own anyway go on sale, and we aim to be the ones standing there able to buy. That is not a mindset anyone talks themselves into. It is the position we work to be in.

I cannot tell you when the next drop comes. No one can, and I would not pretend to. What I can do is help set things up so that when it does, we are positioned to buy rather than forced to sell. That is how a falling market can turn from something we survive into something we are ready for.

Talk Friday.

— Mateo