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When the stock market falls for a few days or weeks in a row, the question comes up: "Is this just a temporary correction/pull-back or the beginning of a long-term down trend in the market?"
In case of a correction, I would just sit it out and do not sell the funds I am holding. In case of a long-term down trend, I would like to sell my funds.
How do you decide for yourself what the most likely scenario is and what actions do you take?
if anyone can answer this and isnt being paid a billion dollars by a major brokerage then dont believe them,they are guessing. the answer is a good portfolio will withstand all parts of the markets cycle. no one can time this stuff and know whats a blip,whats a trend or whats coming next. quite frankly i dont really care.. my plan has me rebalancing if we drop and selling some winners if we rise....
You are emblematic of what ails most small investors - fear and recklessness. You can't be blamed for being that way though ... human nature is fight or flight. And when it comes to money, few have the stones to fight.
Remember the phrase "buy low, sell high"? Apply it.
During the crash of 2008, I was buying Ford like a maniac. I rode it all the way up to $15. My overall gain was about 500%. Why? Because Ford is a global company, with killer products, better management under Mullaly, and just a great economic footing now by paying down their debt.
And they didn't take a bailout.
Other people (even rich ones) were all selling F because "the world was ending and the end of our market driven economy was certain." Bull. It will take more than a few irresponsible homeowners (who shouldn't be) and reckless banks to make our economy fall.
So yeah. I agree with mathjak, just have a balanced portfolio and buy opportunistically companies who are undervalued based on their cash position, revenue, profit margin, and debt position.
Most folks are so concerened about getting in and getting out in time because their investments tend to only bet on one economic outcome,prosperity . No one, not bill gross, not meridith whitney ,not nouriel roubini ,no one can accurately predict anything beyond their noses. If they guess right once you can be sure it wont happen next time. their are 4 major economic outcomes .recession,prosperity,inflation,deflation, betting on any one of them is speculating in my book ,not investing.
their are 4 major economic outcomes .recession,prosperity,inflation,deflation, betting on any one of them is speculating in my book ,not investing.
I remember your comment on one of the other posts regarding re-balancing your portfolio on an annual basis. That is how you handle this type of situations. Clear. Thanks.
During the crash of 2008, I was buying Ford like a maniac. I rode it all the way up to $15. My overall gain was about 500%. Why? Because Ford is a global company, with killer products, better management under Mullaly, and just a great economic footing now by paying down their debt.
"Ford" that was a great pick. But not everyone has the skills, time or interest to analyze and interpret balance sheets and product pipeline. In 2008, GM was also a global car company. And in another industry, Nokia was in 2008 a real market leader with a good balance sheet. And see what has happened to those stocks.
Thus I can see the benefits of having a balanced portfolio. But picking the great undervalued companies is something that very few can do (otherwise they would not be undervalued).
good advice on this thread. Don't ever try to call tops and bottoms. As someone else said - if there were ANYONE that could do it, they would never lose a single trade.
Look at the 50-day moving average of the market, if it's sloping upward, keep buying. sell when it starts to slope downward. Sure, you're not going to walk away with as much as if you had been able to call the tippy top, but you'll keep what you made the whole way up. If you keep trying to call the top, sell, buy back in when you realize it was just a blip, ad nauseum - you'll slowly eat away your funds.
moving averages reminds me of the strategy by one of the most popular newsletters fabian ,.. it worked great until it didnt . big market swings that were so fast left folks still waiting for the moving average to react as their losses grew only to be whip sawed as things reversed.....
The best way to determine if a downward trend is becoming entrenched is to simply listen to other investors, a lot of the market is psychology. If people start to believe that its a "long-term" trend it will become one, if people think its a short-term trend its likely to be one.
listen to what folks are saying then do the opposite usually its the more that are bullish the odds are we are falling from there,the more bearish the odds are we go higher... all our biggest drops happen when things are looking up and humming like a baby and folks are sooooo happy about being in the markets. ,all our biggest gains come from the depths of hell when things look like they can only get worse and the words stock market want to make investors vomit..
Last edited by mathjak107; 02-22-2011 at 03:28 PM..
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