At Rich Dad, we are always telling people they need investments they can control.
Relying on the government or your employer is never safe or secure.
Neither is relying on the markets.
Markets have cycles and patterns but they are also victim to the whims of a lot of different forces.
This week China was the force changing the market.
The leaders in China needed to do something to bolster their economy. They chose to fire the first volley in a monetary conflict by letting the value of the yuan drop.
What does this do?
It makes their products much cheaper for other countries to import. It also makes non-Chinese products much more expensive to the Chinese people.
This triggers a trade conflict.
Many are predicting the U.S. will devalue the dollar to help their products sell in an attempt to stave off a huge unemployment surge.
Historically this has created a domino effect forcing countries to devalue their money. It becomes a dash to see who can devalue their money fastest.
This will cause huge unemployment swings, manufacturing swings, and national chaos.
The scariest part?
It will be up to the Fed and the Chinese government to try to repair. That’s like putting your homeowner’s claim in the hands of the guy who burnt your house down.
Oddly enough, this volatile landscape highlights one of the greatest things about stock trading: it is highly liquid and highly agile.
A savvy investor can use the stock market to capitalize on just about anything going on anywhere in the world.
Because stocks are so liquid (easy to obtain and sell) and agile (they can move in any direction immediately) an educated investor can get into or out of any deal within seconds. This flexibility will allow the educated investor to make changes as fast as the chaotic markets change.
One more great thing about stocks.
Just about anyone can get in the stock market. It is very scalable. You do not need a lot of money to get in. But you do need knowledge.
With knowledge you can profit greatly from a volatile market. Without knowledge you will be the market’s victim. As Warren Buffett said,
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
Remember, knowledge is what makes a good investor, and only a good investor can profit from the world’s foolishness.