Building Wealth During Market Instability

Editor's note: Markets have been unpredictable this year – but that doesn't mean it's time to retreat. In this issue, adapted from the free Health & Wealth Bulletin daily e-letter, our colleague and MarketWise CEO Dr. David "Doc" Eifrig explains why resilience, not fear, is the key to building long-term wealth... and why market pullbacks often offer great buying opportunities.

Forget Warren Buffett and George Soros for a minute...

We want you to think about a different investor – a young woman named Alexandra Bergson.

She arrived in the Nebraska plains with her brothers around the turn of the 20th century. Their parents were Swedish immigrants who had set out to become farmers. But early on, things looked bad...

Their corn crop failed. To make up the loss, they planted a bigger crop the next year... which then failed, too.

During that second year of failed crops, the Bergson family considered leaving Nebraska, like many others already had. But then, Alexandra made a decision...

She traveled from the highlands to the farms near the river. She spent a week interviewing the locals. These farms were doing better. Alexandra returned, convinced that her family could follow their example and learn how to work the highland.

Alexandra pushed her family to mortgage their property and scoop up all the land they could from frustrated and scared farmers. Her brothers worried that everyone else would think they were crazy. But her plan prevailed...

And it paid off. Over the next 16 years, the Bergsons became one of the wealthiest landowning families in the area.

Even if it has been a few years since you sat in a high school English class, you might recognize this story...        

Alexandra is the heroine of Willa Cather's 1913 novel O Pioneers!

Her story is about the classic American dream... the notion that with some insight, hard work, and the courage to act at the right time, you, too, can build generational wealth.

As I'll cover today, the same is true in the stock market – especially in times of instability...

As Alexandra told her brothers when pushing them to expand their holdings...

The thing to do is to sell our cattle and what little old corn we have and buy the Linstrum place. Then the next thing to do is to take out two loans on our half-sections, and buy Peter Crow's place; raise every dollar we can, and buy every acre we can... As sure as we are sitting here tonight, we can sit down here 10 years from now independent landowners, not struggling farmers any longer.

The virtues of capitalism paid off for this family. By providing a reward to risk-takers, land that would have been abandoned was coaxed into becoming a productive asset.

So far this year, though, you've likely felt the instability of capitalism just as much as its wealth-building power. After President Donald Trump's tariff announcement in April, markets spent days in freefall.

Investing in stocks is always risky. And even some of the best blue-chip stocks in the world today aren't immune to economic uncertainty...

The S&P 500 Index fell 12% in less than a week following the "Liberation Day" announcement.

Now, stocks are back at new highs. If you stayed on the sidelines after the drawdown, you would have missed the rally that followed.

Drawdowns in stocks happen... It's the cost of admission.

Don't fool yourself into thinking you can avoid them when they hit. Crises like these are unpredictable. And if you sell at every sign of fear, you end up selling little dips, buying back in at a higher price, and missing market rallies.

To quote legendary investor Peter Lynch, "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."

Don't Let Market Fear Keep You on the Sidelines

The banking system nearly collapsed during the 2008 financial crisis. And the COVID-19 pandemic shut down borders around the world...

But we came back from these crises. Not only that, but those periods created incredible investing opportunities.

As before, the economy will come back... and the stock market will, too. It's part of the reason I always tell subscribers that, at its core, investing is simple...

Buy great businesses at reasonable prices and hold them for a long time.

It doesn't have to be any more complex than that. You can find great businesses all around you. Companies that you use and can understand are the ones you should be buying when market turmoil strikes.

Our advice is to own companies whose business models you could explain to a complete stranger. And we also think you should own companies with lots of cash – businesses that can survive a recession and even gain market share as competitors struggle.

Those are the types of businesses you want to own and hold for the long haul.

So when the next pullback happens, instead of selling everything and going into cash, take a breath...

Times of uncertainty are exactly when you can find some of your favorite businesses trading at huge discounts. We recommend you put any extra cash into those types of long-term stocks – instead of sitting on the sidelines.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: In his first address as MarketWise CEO, Doc is issuing a stark warning: America is living through a Great Devaluation. Every promise tied to your retirement is now at risk. Social Security... health care... even the value of your dollars. That's why Doc is revealing the simple, low-risk strategy he has personally used for decades to protect his wealth – and how you can do the same.