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Do you always keep some cash reserve even when it's a great buying opportunity as in a market meltdown? (I am only talking about your investment money, not including your daily spending and emergency cash)
I have been an unvestor for almost 30 years and have had only 3 crashes and since i was never in dot coms really 2 . Had i waited for just those moments i would have been a whole lot poorer today. Especially because you will never catch the bottoms.
We all thought low in 2008 was when we fell 2000 points . Who would have guessed there was 4000 more to go
In 1987 no . In 2008 yes. But overall compared to what was added it really did not change things much. The bigger your balahce the harder it is for new money to make a difference
I usually stay pretty much fully invested as I can usually find stocks that are attractive to buy. I figure I'm not smart enough to try to time the market; who knows when the next "market meltdown" might happen. There are those who post on the investing forum who have had cash earning next to nothing for the last few years waiting for just that opportunity and it hasn't happened yet. And if it does, would they really have the fortitude to dump the cash into the market or would they still hold off waiting for an even further fall?
That being said, I have been edging into cash a little bit until the election is over, as I am not sure about what will happen if Trump wins. Not doing anything drastic, just only rolling over part of the proceeds from any stock sale instead of all of it.
I started buying blue chips stocks in 2008 when they had been decimated & leveled off a bit. Unfortunately little did I realize that they were less than halfway down the steep slope they would eventually crash. It took years for them to double in price & I was still at a big loss then. I eventually took the loss on some & others moved up through the years but glacially.
I'm glad I didn't put everything in & kept some $$ in reserve for the actual recovery. Now I'm almost entirely an index fund guy, but I did buy Coca Cola, McDonalds, Caterpillar last year when they all took a sharp dive, I don't see the world's population not buying cokes or Big Macs in my lifetime. CAT is just starting to come back recently. But these are small "hobby stock" bets, not my big investments.
I take large positions in companies that have either been beaten down due to world events or scandals.
Over the past year I have placed large bets in relation to my portfolio on these companies:
Exxon/Shell/BP/Chevron
Mitsubishi Motors
Bank of America
Volkswagen
Spirit Airlines
I do not buy and hold, I buy and sell, trading on the recovery.
Mitsubishi scared me a bit. Company was earning $1+ bil US a year cash. Very little debt. Had $4 bil in cash at the time of the scandal. I bought when it was around $4 bil market cap IIRC. I lost around $60k in about a week. Bought it around $4.85/share I think, dropped to around $3.85 at it's low point, I was crapping bricks, but the price just didn't make sense. Even if they discontinued ops that price was below their cash on hand! Popped to $6 when Nissan announced the equity stake, glad I didn't sell before that!
It did teach me a lot. So far I admit I have been lucky, although I buy when prices just don't make sense. I wanted to buy AAL when their P/E was around 2.2, stock price was $25/share, absolutely ridiculous. I just couldn't buy it as I work for the company, that is the golden rule, never own stock in a company you work for. Price hit ~$35 a week later. I was primed and ready to drop $500k on it. But the golden rule, you just have to follow it. Never, ever buy stock in your own company!!
I enjoy researching companies and the market in general. Emotion plays such a huge factor in the stock market. The new high speed trading and algorithms have created buying opportunities like never before as "flash crashes" happen it seems almost regularly.
I don't buy penny stocks, or stocks that are "hot" like Tesla, Chipolte, etc. I need sound financials/earnings and a real business model with history.
Wells Fargo might be a good bet in the future. Just keep an eye on it. I just don't think we know the scope of their issues yet. It needs to sell off some more before tiptoeing in for me personally. You're only going to see 10%-15% upside at this point, not enough to throw a lot in. For me at least. I however have a tough time trading this one as I think their management should be in jail. Something to think about...the people fired were the people who refused to do illegal activity. The ones currently employed there are the ones who performed multiple kinda of felonies. It's pretty messed up.
I'm not sure it will sell off much more unless things get really bad as the company has the following of Buffett and the market knows that.
Do you always keep some cash reserve even when it's a great buying opportunity as in a market meltdown? (I am only talking about your investment money, not including your daily spending and emergency cash)
I was all in during the 2000's, but I accepted that risk before I invested. Never flinched. Only in the last couple of years I have kind of dollar cost averaged by adding about 25% bonds.
I had half of my portfolio sitting in bank accounts in 2008. I was feeling sort of out of touch until the market crashed. I went back in around September 2009 but even then put 50% in bonds. I had a very cautious investment advisor.
I am currently becoming cautious again. The overall economy is relatively healthy but clearly the markets are nervous. An increase in interest rates will give us another short term drop. Then we have the big unknown with the current Presidential election. I have a plan worked out with my advisor and am ready if we seem to be reaching a tipping point. I don't try to game the market short term, but I definitely believe in watching the longer term issues.
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