I Hope the Stock Market Crashes Hard

NEW YORK (TheStreet) -- This tends to spook people. The thought of a stock market crash or meaningful correction. More than anything, it's the volatility that scares investors.

I can understand that you might fear crashes, corrections and volatility if you need your money now. The last thing somebody nearing or in retirement or ready to tap capital for an important expenditure wants to deal with are wild market gyrations and extended downside.

But, if you're a couple of years (slightly more, slightly less) away from something big, you probably should have your portfolio structured defensively anyway.

Earlier this year, when I wanted to keep a pool of money liquid, I took profits in everything (and a couple of losses), leaving only three positions intact -- the somewhat defensive, but hardly sleepy American Electric Power ( AEP) and Becton, Dickinson and Company ( BDX) as well as one of my favorite speculative plays, Pandora ( P).

In that account, I was fine with a 13% stock/87% cash position.

Now, as I've made the decision to take that cash and reinvest it in equities, I'm just waiting for the other shoe to drop.

I'm getting impatient.

That's the biggest thing I have to work on as an investor -- being more patient.

For instance, right now I'm salivating at Starbucks ( SBUX) under $50 a share. The stock is up about 24% over the last year, but down roughly 15% and 3% over the last six months and past five days, respectively.

Part of me wants to rush into SBUX today.

After all, it's a long-term proposition with the type of management team I can get behind. As I'm fond of saying, Starbucks rolls like a tech company. It's ahead of most meaningful curves, particularly mobile. And CEO Howard Schultz continues to inspire confidence in recent media appearances.

That said, I think I should hold back. I want to use my gauge of market irrationality/investor fear to my advantage.

We're in a great rally right now. From point A to point B, we've seen nothing but upside. Consider the PowerShares QQQ ETF ( QQQ).

QQQ Chart QQQ data by YCharts

If you bought any of those valleys over the last two years, you're better off for it.

As usual, the fear and, to a lesser extent, actual unfolding of one crisis or another drove the broad market down on practically every dip. There's nothing quite like looking back, knowing that you stayed calm and purchased equities in the face of the hysteria of the day.

Really, it's a simple formula, buy strong companies on the dip. And couple that with a few index and/or sector plays you believe in.

For me, it was media stocks (e.g., Time Warner ( TWX) and Madison Square Garden ( MSG)) toward the end of 2011, beginning of 2012.

Today, I focus on names such as Starbucks. Great brands with innovative leadership, plenty of room to grow and a loyal cult of habit-formed, lifestyle, mobile and/or tech-savvy consumers.

Lululemon ( LULU) is nearly as strong as Starbucks from a brand standpoint. In some respects, it's "the next Starbucks."

While I might not be the biggest Apple ( AAPL) bull in a post-Steve Jobs world, it, almost better than any other stock, illustrates my point perfectly.

QQQ Chart QQQ data by YCharts

Over time, nothing matters aside from buying strong companies when the world appears to be coming apart at the seams. Certainly, you'll miss on a few buys and pass up on what would have been a winner or three, but, time and time again, the strategy wins out.

You don't need technical analysis and too-cool-for-school quantitative metrics to spot fantastic stories such as Apple, Time Warner, MSG, Starbucks and Lululemon.

You don't need a market crash either. If you feel like you've done your homework on the stocks that excite you and you're in for the long haul (meaning many years, not months) there's probably no time like the present to buy.

Personally, I'm waiting on and hoping for massive multi-day drops across the major indices. The type of thing that sends the 24-hour news cycle into a tizzy.

I've experienced enough of that type of volatility. It doesn't rattle me anymore.

I remember when I used to rush to log into my brokerage account while carnage was taking place. Part of me said I should be buying right now, not panicking. However, a persistent fear that a.) it's going to get much worse and b.) it might not get any better, keeps your from pulling the trigger and shakes you out of positions that will ultimately recover and then some.

Powerful psychology works on most of us in those situations. It takes a ton of time to train your brain to work through it. I'm convinced you just have to see the same thing happen - repeatedly - before you make the smart decisions, not ones that your most intense emotions dictate.

In this case, it means taking the next crash or correction in stride: Shake off the initial panic and buy those names you're convinced will lead not only the ensuing rally, but the inevitable bull run to come.

At the time of publication, the author was long AEP, BDX and P. He is long MSG in a custodial account he manages for his minor child. In the next 24-72 hours he may initiate a long position in AAPL, LULU and/or SBUX.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Rocco Pendola is a private investor with nearly 20 years experience in various forms of media, ranging from radio to print. His work has appeared in academic journals as well as dozens of online and offline publications. He uses his broad experience to help inform his coverage of the stock market, primarily in the technology, Internet and new media spaces. He has taken a long-term approach to investing, focusing on dividend-paying stocks, since he opened his first account as a teenager. Pendola, 37, is based in Santa Monica, Calif., where he lives with his wife and child.

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