Thoughts: Investing in a bear market?
Firstly, do not try to catch the falling knife. When the market has come down so much, it is always tempting to pick stocks that look at a bargain. Even if you are a long term investor, you may want to see the market stabilizing before committing your capital into the market. It is better to enter the market at a higher price on the way up, but with less downside risk.
Typically, a 25% stop loss will protect your assets without causing a lot of excessive buying and selling due to minor market fluctuations. A key thing to remember is that stop loss points are fluid. That is, you should move them as your investments increase in value. This process locks in some of the paper profits and protects against major down moves. An important point to remember is that your stop loss should only be moved up as your investments increase in value. You should never adjust them down. This will only end up costing you money and defeats the whole purpose of the stop loss in the first place.
The best time to invest in the stock market is when the economy is coming out of a recession. This is when all the prices start to increase. You will never know for sure what the market is doing. The best thing you can do is invest consistently over time and concentrate more when entering a bull market and less when entering a bear market.
It took the market 20 months to reach the bottom of the cycle, and in the 12 months following the trough, the market increased by 52.90%. Altogether it took 59 months for the market to recover to its previous high again.
Strategic recovery patterns for investors: DON’T START YOUR INVESTMENT CAREER WITH FAILURE: Don’t buy stock because you hear that every body is making money in stock market as a result you want to make quick money. That is being pushed by greed and get-rich-quick mindset.
As investors, what should we be doing to protect ourselves during these extended downturns in the market? Let’s look at a couple of strategies.
We have seen in recent months the price of oil collapse from $145 and gold trade recently at $768. The early 1980’s high for oil of $40 per barrel, and again reached in 1990 and 2000, may actually act as support to the oil market at the current level from which the oil market may rally. Gold may be working off a correction, though may trade lower before it resumes a strong uptrend.
They will now be living ‘in hope’ for a bull market and a recovery to bring their wealth back, many not realizing that they will now have to make back over 100% – just to get back to where they were a year ago.
This table and the sobering charts above vividly demonstrate the vital importance of using systemic stops, in addition to individual stock price stops, to:
1. Cut loss your position. It is always tough to tell where the bottom will be when the market is in free fall. Do not try to hang on hoping the market will bounce to save you. Just like trying to save yourself when your house is on fire, you will not stay inside your house hoping the fire will get put off soon, right?. The fire will be over sooner or later, but by the time it is over, you may have nothing left. Take any rally attempt as a chance to unload your position.
The current bear market is already comparable in severity to the terrible 1973-1974 market, and may even approach the pain of the 1929-1932 declines before it is over. Reasons for this may include of course, the frozen credit markets, excessive public and private debt which may inevitably lower living standards in our country as the debt is worked off, or a lack of confidence by wealth holders in the likely policy initiatives of the incoming Obama administration, the latter which may cause further problems for the dollar.
Those not active in day trading or on the trading floor can find themselves behind the trends, especially in a bear market, marking possible losses in a portfolio.
Better yet, learn to invest. If you maintain a balanced portfolio of stocks, bonds and money market securities, you may lose a bit in bear markets. But you won’t get mauled, and your investment portfolio should bounce back in the next bull market.
If you are not an active investor, then the best way to protect your investments during a bear market is by proper diversification. Proper diversification does not mean owning several stock mutual funds. It means investing in assets that have little or no correlation to the overall stock market. Investments like energy, precious metals, natural resources, or inverse funds all qualify as suitable investments for a properly diversified portfolio.
2. Stay away from greed and fear. You have probably heard this a thousand times and that is for good reason, most traders never learn these lessons. That is why so many traders do not make it. When you have hit a sell point or buy point, follow your trading method and do not be led by emotions – they kill you almost every time!
Treasury Bills, Commercial Paper, Corporate Bonds, Certificate of Deposits and Repurchase Agreements – Collectively are referred to as Money Market Instruments.
I recognized in August 2007 that a decline in financial issues represented a potential breakdown from a long distribution pattern in these stocks (when shares are unloaded by informed holders to weak or less informed holders).
There are some in the current bear market, who are dismissing the long term investment techniques practiced by such investing geniuses as Warren Buffett and others of his kind over the past few decades. In fact, the technique of security analysis from which Buffett’s methods originally emerged, was out of the thinking of Benjamin Graham during the Great Depression. Security analysis was born during the bear market of the 1930’s, when common stocks were viewed as dismal investments. In fact, it may be argued that investing for the long term during extremely depressed stock markets may provide good investment outcomes over the long run.
4. Rotate your portfolio. If for some reasons you should stay in the market, it is time to rotate your portfolio. Buy stocks that are defensive in nature, the ones that have regular income streams, or those that are not so much affected by weak consumer affordability, such as utilities, healthcare, or consumer staples.
Bear markets and bull markets occur in the U.S. stock market, in foreign markets, commodities markets and virtually all organized markets or exchanges in existence. A bear market is simply a downward trend in prices, while a bull market is an upward trend. There is nothing new about this concept. Bear markets and bull markets have been with us since the beginning of organized markets.
The S&P500 closed below the moving average on Friday 4 January 2008, so we closed the four remaining companies in that portfolio on Monday 7 January 2008 for a small average profit, as republished below:
So in nutshell the wise trader would profit himself by range trading by taking advantage of the shorter and quicker recoil that occur as stocks get oversold and retrace upwards.
FAILURE IS NOT THE END: Even when stock market is experiencing some bearish moments like some stock exchanges the world over. Convert your short term stock to long term investment, in this way, you will recover and make a lot of profit in the long run. YOU CAN BE WEALTHY WITH STOCKS: Buy stocks based on accurate information. Read about stock from conventional newspapers and financial papers. During bearish period, buy a lot of cheap stock for long term.
Commercial Paper
Its is however important to note that Although securities purchased on the money market carry less risk than long-term debt, they are still not entirely risk free. After all, as we all know banks do sometimes fail, and the fortunes of companies can change rather rapidly. But it has to be said that the range of possible outcomes is less for short-term investments than for conventional equity and fixed income investments.
Remember, cycles come and go; but the long term trend has always been up historically.
Examination of the Australian All Ordinaries bear market falls and crashes since 1935 shows that the largest fall from peak to trough began in January 1973, when the ASX All Ordinaries Index fell by 58.20%.
A corporate bond is an IOU issued by a public company, such as BT, ICI or Marks & Spencer. When you invest in a corporate bond, you are lending money to the company. In return you will receive interest at a fixed rate and the promise that your capital will be repaid at a certain date in the future.
Experience of the old players of this field suggests there is no scope for careless trading during bearish markets. The margin of error for a trading signal is much lower when trading in a bearish market. In bearish markets, people are satisfied with lesser profits, but trading more often and in higher volumes. To aid in their margin of profits, they are able to negotiate the lowest brokerage terms possible with their brokers or to use low-priced online trading platforms.
Next, you need to make sure the risk in the client’s portfolio matches his or her tolerance. My opinion is that past history is a poor predictor of future results.
Commercial Paper is short-term loan that is issued by a corporation use for financing accounts receivable and inventories. Commercial Papers have higher denominations as compared to the Treasury Bills and the Certificate of Deposit. The maturity period of Commercial Papers is a maximum of 9 months. They are very safe since the financial situation of the corporation can be anticipated over a few months.
Corporate Bonds
Prices fluctuate in any market, and over a period of time prices are either rising or falling. The price trend is either up or down. Think of it like this: when a bear attacks it comes in high and mauls the victim down; when a bull charges it comes in low and rears its head up when it attacks.
Why are investors so concerned about these market trends? Very simply, the vast majority of people who own stocks lose money in bear markets and make money in bull markets. You would be extremely successful as an investor if you could anticipate the change in trend. Speculators can make money in any market-if they guess the future trend correctly.
No matter what the economy is, you will often hear the terms ‘bear’ and ‘bull’ market being thrown around. You might watch CNBC and hear a financial professional talking about the latest bear market and wonder what exactly that means. What is the difference between a bear and a bull market?
One of the finest paths to make a profitable investment portfolio for you may be by buying stocks in the stock market. Since the start of the twentieth century, the stock market has changed into the main investment vehicle. Thus , many people have made great advances in their fiscal assets by buying stocks. Compared to a lot of different types of investing, building assets in the market can give you the best returns. Particularly with the downfall of the mortgage market, making an investment in classic commodities like bonds, mutual funds and growth stocks has become the natural path for investors since the costs of acquiring such investments are generally falling down. Likewise, other safer opportunities like CD accounts or general interest accounts seem to be yielding less and less each day because of the fact the general interest rates are going down.
Our stock market followed suit after Shanghai and declined, with many bank stocks declining sharply. Bank stocks were still trading then at high prices (especially compared to today’s prices).
During bearish markets it is not advisable to buy stocks that are in initial outbreaks and just holding them and coming back again after a few days to reap profits, the way you normally do in bullish markets.
A bear market is a decline in a market. A bear market is most often referred to with the stock market. If the markets have been declining over a long term time period, which can be months or longer, the markets are acting bearish. This is usually determined by looking at how an index is doing such as the DJIA or the S&P 500. For example, if the S&P 500 has been down 15% for the past year, it would be considered a bear market.
A Bull Market and a Bear Market are considered primary trends. A primary trend is the state of the market that is strong across the entire market and usually lasts for about a year or more.
3. Buy put option. If you think you are too late to cut loss, but you are still not sure how deep the market could go from here, you could buy some put option as a hedge to protect your existing holding. Put option will help limit your downside risks. In addition to hedging your position, you may also consider buying put options to take advantage of the market weakness.
In Jim’s original research article of December 2007, he said it was not a prediction that we are going to experience a bear market. Nor is this series of articles to be considered financial advice. No one knows where markets are going. Common sense technical analysis is not about predicting the future but working with probabilities and reacting to price change. Common sense money management is about preservation of capital.
Protect capital
There are numerous software programs available today that can assess investment risk on a forward-looking basis. Many of them use a Monte Carlo style of risk analysis. If you have not used this type of software yet, I suggest you try it. The studies I have read have shown that about the best you can be expected to do on a forward looking basis is a risk to reward ratio of one to one.
Two weeks later, we showed that the Australian All Ordinaries Index was in a falling trend and stated: “If the S&P500 closes below a falling moving average we will exit all notional trades in the notional Short Term Trading Portfolio on Monday’s Open.”
Hire a stockbroker who can teach you the language of the stock market, and try to learn more about the stocks you should invest. However your choice should include the stocks which pay back the highest dividends. Make a calculation of how much money you can invest without having to cut down your monthly expenses and go ahead with the dividend reinvestment plans.
This is a quote from that article: “If the All Ords and S&P500 both have a weekly close below a falling moving average we must prepare for the possibility of a bear market. This bearish All Ords – S&P combination would be the fifth time this has occurred in the last twenty years”.
These are extremely revealing figures. They show that as of 23 January 2009, the losses SINCE we exited the notional positions a year earlier on 7 January 2008 were:
Many financial professionals now believe that we are headed for a major bear market. Part of the reason they believe this is because they believe that we are also headed for a
In comparison, those Newsletter Members who read Jim’s warning signals in December 2007 and January 2008 and decided to exit their positions have had the benefit of being in ‘cash’ for a year so far. Once the next rising market generates an entry signal, they also have the opportunity to generate their share of that 100% in however long it takes – as additional profits – while their counterparts strive just to get back to even.
Though making profits in bullish markets is easy going but to trade successfully or find profits in trading during bearish market is an art let me quickly give you some tips on
No uptrend will ever continue forever and no investor or trader should ever feel that they’re invincible. At any time the market can roll over and turn down, then fall for several years when a Bear Market occurs ……. or it can crash almost instantaneously. We cannot predict what the market will do.
3. Learn to depend on others. If you do not have a trading partner and/or mentor then you should seriously consider one. If you are not using trading software that provides consistently winning trade signals then I recommend that you find one (I have included a review site that takes a look at one of the better software programs on the market).
Certificate of Deposit
* Did not have the education to create a proven trading plan
It may be consistent with the tenets of successful long term investing to still hold through this bear market a position in selected common stocks and mutual funds. In the next long term bull market some years away (notwithstanding cyclical, or short term bull markets), these investments may do quite well, if the long term record of stocks is any guide.
Do not let the market discourage you as there are ways to survive a down market. You may have to take quite a sizable losses, but at least take some actions that will not get you disappear from the stock market forever. Here are some alternatives of action you may consider to protect your capital.
5. Get rid of growth stock. This is the first batch of stocks you need to dump as there is no place for growth stocks in a bear market. Growth stocks tend to outperform the overall market during bull market, but underperform during bear market.
Stocks of long term treasury yields have lesser value than stocks with dividends, since they get lenient tax treatment. The returns from the treasury bonds are liable to be subjected to about 35% of Federal tax, even though it is exempted from the state and local taxes, while the dividends from stock investments invite only 15% of tax. Then again, you get capital gains which are churned out of an increasing stock price.
First, if you are an active investor and by active I mean that you regularly monitor your investments, set active stop loss points, and make buy/sell decisions on a fairly regular basis. If you fall into this category, the first thing you must do to protect your investments is to set proper stop loss points for every investment in your portfolio.
How will you hedge against further market declines?
Remember, bear markets do not last forever. They eventually turn and become bull markets and when they do, investors who have preserved their investment capital will be in a position to profit handsomely.
Stock Assault, an artificial intelligence day trading program designed by 25 elite day traders, is a solid solution to avoid being caught behind the trends. Stock Assault is right there on the trading floor, analyzing trends, and surmising picks for any progressive stock portfolio.
Most folks make money in stocks by taking a long position. They buy stocks and hold them. On the flip side, others try to profit by taking a short position, betting that prices will fall. Leave short positions to the speculators. Prices rise more often then they fall in the stock market. In other words, most of the time, the U.S. stock market trend is up.
Long term investing has not been relegated to financial history, and that an investor may be wise to hold long term common stock and mutual fund positions as long as one is properly diversified across industries, countries, and asset classes (such as gold and foreign currency money market and bond funds). Diversification may help the investor manage a bear market in stocks. I believe that diversification is most important when we are in a long term bear market, as we are now, in my opinion, and until we may again enter a new long term bull market in stocks.
Of greatest concern to most investors is the cyclical bear market or bull market, which normally lasts for several months or for a few years. To qualify by common definition, a drop of 20% or more from a previous market high, or a rise of 20% from a previous market low must occur to have a cyclical trend.
The Bulls and Bears of stock market would have been much easier to grasp had it been exactly about the bulls and the bears- the ones that roam on all fours with twirling tails in their backs. Alas!, that such a wish might not come true. Indeed, the stock market is not a zoo caging the wild bull and the grizzly bear, but wild and grizzly it certainly is. The brave, aspiring souls who want to whip up a big load of cash within too short a time have dabbled in the shares and stocks, and their losses have proved to be warning examples for the more timid kind of this race to stay away from the stock market.
How can you develop a recovery plan and restore people’s confidence?
Bear markets, however, can be brutal. In late 2007 a bull market gave way to a bear market. In 2008 alone, U.S. stocks in general lost almost 40% of their value. Many foreign stock markets did even worse.
Take this advice that had been briefly shared and you will be a winning trader, it is that simple. Good trading ahead.
When you see that there is a bull market, you may be tempted to think that this is the best time to invest. This isn’t necessarily the case. We could be at the peak of a bull market and you wouldn’t know it. You might see all the prices shooting up so you buy a lot of stock. If it’s the peak, it may soon begin to drop and you lose money, or it will stay the same and you won’t make much. The same goes for the bear market. You may invest in the bear market because it looks low and can only go up from there, but it could keep going lower.
Trade Entry Date Entry price Exit price Notional Profit
A bull market is just the opposite. A bull market is when the stock market has been increasing faster than the average. Again, indexes are usually used as a benchmark to determine a bull market. If the historical average return for an index is 12% and for the last year or so it has been 16%, then it is a bull market.
The following table shows a summary of the stocks above, including the last one which, while not in the notional portfolio, was being featured at that time as extra examples.
First, in order to manage risk, you have to assess risk. Have all of your clients complete a risk assessment questionnaire. The questionnaire should be provided by your broker dealer and stored in the client’s compliance file. Have couples complete separate risk assessments.
* Minimize losses.
Whenever you’re looking for an investment opportunity, there is a selection of options that are available to you. Investing your money can be extremely profitable, as it will enable you to grow your fiscal assets for your future. Remember that you can always lose your job or worse you can even have medical issues that can prevent you from carrying out your daily task in your life. So, if you have not made a review of your personal finance, then you can be at risk of losing the control of your life.
In December 22nd 2007, Jim Berg began preparing readers of his ‘Investing and Online Trading’ mentoring style newsletter for the possibility of a Bear Market in 2008 with a nine page article, entitled ‘Crash vs. Bear Market’.
If you are an average or uninformed investor, learn to deal with changing market trends. Don’t let a bear market spook you, and don’t let it chase you from the investing arena. Don’t cash in all your stocks and stock mutual funds, and don’t give up on stock investing. Historically speaking, sometime in the not too distant future the bull is ready to rear its head again.
7. Do not average down. Some people do this to lower their average entry price. You may do it if you know for sure where the bottom is and when the stock will rebound. The problem is we are not sure of these and you will end up throwing good money after bad money. Some stocks take years to come back to their heydays.
During the transition of the market from bullish to bearish, accept this fact gracefully and then make your future plans otherwise you will never be able to come out of that fright and would end up bearing losses. Shoulder the responsibility of your own trading action and do put the blame on your broker or your friend who has given you the “tips” that led to your losses.
Naturally, the market also entails some hazards ; thus you’ll need to be calm and patient in your endeavors. You’ll need to get detailed information about the stocks that you have an interest in and then you’ll have to make certain that you look at that particular company’s performance on an once per month and annual basis. Maybe the best plan will be to get some professional help from an expert who knows the dynamics of the stock exchange like the back of their hand. This may be a right way to guard yourself and to speculate in stable growth stocks. There are professional consultancy companies out in the internet and it’s necessary for you to research through them to find one that suits your wishes. Then you can start investing and earn money from this market.
As it goes that trading in a bull market is much comfortable and lots of money making is much easier than trading in a bear market.
How can you assess risk on a forward-looking basis instead of a historical basis?
Naturally, although commodities such as gold could be a stable instrument, again the yield potential will be typically low. So, as you can see, trading the stock exchange could be a good option for many individual investors. However, you’ll need to be a good researcher of general market conditions, so you will be ready to steer yourself obviously in uneasy waters.
Repurchase Agreements
1. Know why you are getting in a certain trade. If you have no technical or fundamental reason or objective for entering into a trade then you are setting yourself up for a disaster. Have a clear objective with a well defined entry and exit point.
2. Sell your margin position. When your position is on margin, your potential downside will be even worse. Sell your position in order to prevent yourself from getting a margin call. Instead of bailing out the falling stock, it is better to save your cash for better opportunity later on once the market has stabilized.
They also show the folly of listening to the Myth that ‘Time in the Market is More Important than Timing’, the mantra chanted by several so called ‘professional’ brokers, analysts and financial planners – to justify their inadequacies in understanding Technical Analysis. (Also, see Jim Berg’s YouTube Video ‘The #1 Myth Busted’.)
The Repo or the repurchase agreement is used by the government security holder when he sells the security to a lender and promises to repurchase from him overnight. Hence the Repos have terms raging from 1 night to 30 days. They are very safe due to government backing. Due to this short turnaround time, these agreements are the most liquid of all money market investments, they are very similar to bank deposit accounts, and many corporations arrange for their banks to transfer excess cash to such funds automatically.
What causes a bull or bear market? These markets fluctuate with the economy. If the economy is doing poorly and there is a recession, the markets are bearish and will go down with it. If the economy is doing especially well and these businesses are booming, a bull market will result.
If your need for big cash compels you to join, you must remember that incurring losses is as much possible as it is for a gas balloon to sink down. Before your invested shares are worth much profit, there could be a sudden downward spin where your shares lose out on their values. In such a case, you do not sell, but hope with your fingers crossed that the forces start moving in your favor. There will soon be a turnaround, and your shares will get their price up and above the profit mark. But even then the stock market is frequented by bouts of gloom and boom, and your investments are never safe.
Clients want to know if you have a plan to protect them from further market declines in the future, another plan besides “let’s wait another 10 years for the markets to come back”.
In other words, if the projected future returns of a portfolio are about 10%, the projected standard deviation should be about 10 as well. There are several types of financial software available that can do this type of analysis. Do research on the Internet or check out blogs for financial planners.
Many active investors look at the overall market and when the risk of being invested in the market becomes greater than the potential for profit, they move into cash and wait for the markets to settle down. After a major bear market, like we saw in the late 1960’s and early 1970s, investors who were in cash were able to pick up investments at wholesale prices and made tremendous gains in the ensuing years as the market began to recover.
How to select stocks in the Bear market like the richest man in the World: Picking stocks like Warren Buffett should be a major desire of any trading investor who wants to become a guru in trading stocks and making billions from the stock market. Trading is different from investing. Use billionaire’s strategies if you want to be like them. Out of 483 billionaires, 42 made their billions through stock with the current richest man Warren Buffett being one of them. He has a net worth of $62billion. Trading in stocks refers to short term investment while profitable investment is long term. Picking stock successfully like him involves being a able to value stock at their actual value.
For making with profits trading with trend is the key in bullish markets, on the contrary, in bearish markets, the market freezes, and trends are “shorter” in duration or the market will go into a sideways direction, with prices fluctuate between ranges. So it is always that during bearish markets, range trading is better rather than trend trading. Adapt yourself to this quickly else you could be caught with short term trend changes and suffer whipsaws and lose money trend trading during bearish markets.
Treasury bills
Make sure that if you are confronted with losses from a sudden crumple in prices; admit that it is your liability to now set up action to get out of these circumstances with profits.
Treasury bills are issued by the Central banks such as the Bank of England or government treasury departments. The Treasury sells bills at regularly scheduled auctions to refinance government projects and obligations. It also helps to finance current government deficits.
A certificate of deposit (CD) is a time deposit with a bank. CDs are generally issued by commercial banks but they can be bought through brokerages. They bear a specific maturity date (from three months to five years), a specified interest rate, and can be issued in any denomination, much like bonds. CDs offer a slightly higher yield than Treasury Bills because of the slightly higher risk for a bank but, overall, the likelihood that a large bank will go broke is pretty slim. (Northern Rock Plc being the exception of course).
The term bull market is used to describe an upward trend in the market, leading to investor confidence which can lead to rising values of stocks. There is a generally high volume buying trend, with investors expecting their shares to be worth more in the days to come. Because large groups of investors are moving together in buying trends, the group is referred to as a herd.
THE ROAD TO WEALTH IN THE STOCK MARKET STARTS WITH RISK: Every investment has some elements of risk. In fact, investment is a calculated risk. Study stock market very well, knows the fundamentals of the companies you are buying their stocks, convert to long term if bear sets in.
But wait, the good news has not ended yet. The stocks with high dividend yield protect you from losses even when the price of shares falls down in the market. Since the dividend can exceed the buying value of a stock by a large percentage, with the fall in the stock prices, the dividend yield rises further up still. Say that you have bought stock of a company worth $100 with $2 and with a dividend which is 2%. If the price of the stock falls by 50%, consequently the dividend yield would go up to 4 %.( this is calculated by dividing $2 by $50 and multiplying by 100.).Sometimes the dividend paid by certain companies is so high and attract buyers in such a huge amount that it remains completely immune to the fall in prices and rises further up!
If you are a nerve-wreck and incapable of staying even through the suspense of a horror movie, then such an up-down in the bear market could be the cause for a probable heart failure. For people like you, investing in safer investments like fixed income securities and short selling is a good option. In the bear mode, you as an investor can also make use of the “Defensive stocks in the bear market” which is blunt in responding to the quick changes in the market, and thus can remain stable in both times of depression and boom. Here people buy what you may call utilities, certain necessities owned by the government that remain unchanged by the changing economic conditions.
The future should see another long term bull market in stocks (which may not emerge until after years of a trading range bound market). In fact, if our economic system does not buckle completely, then the Federal Reserve aggressive pump priming of the money supply and repeated government bailouts, may result in a terrible inflation problem in the coming years. The Federal Reserve and the government seem to be trying to repeal the business cycle by attempting to inflate away our debts. The types of investments that may do well under this scenario are inflation hedges such as gold and oil.
Here the defensive stocks in the bear market are safer options like the government treasury bonds, where since you buy the state’s debt obligations, the government is sure to sell off assets or raise taxes to pay back the debts. You will earn back what you invested.
If you have never wrought your mind with stocks before, it is better that you take these defensive stocks in the bear market where you will be taking minimal risks (since risks are involved in every promises of gain), and appreciating reasonable profits. Reasonable is all you will see at the beginning, but do not lose heart. Over time these same reasonable profits shall be incremented in their values and thus leave you a rich man.
If you are stock trader then I do not need to remind you that we are in a bear market. There is no need to mention that the Dow Jones Industrial Average (DJIA) has declined almost 50% from its high of only one year ago. Yes, the financials and homebuilders are at lows not seen in decades. In fact, as I write this article, Bank of America is down to $5 a share. Who saw something this bad coming? I did. Who has made +90% winning trades in this market? I have. Am I saying this to brag? No, I have been humbled before so that is not my intent. The fact of the matter is this: You can make money in any market if you practice some simple principles; here are a few of the most important.
It is always easy to get panic when the market moves against your position. The first month of 2008 has been such a difficult time for those having long position in stocks as the market continues to plunge as if nothing could stop it.
Meanwhile, today we revisit the same stocks which were in our notional portfolio, plus another we were featuring at that time – to examine what has happened since we were ’stopped out’ using the systemic rules documented in our newsletter.
A bear market is the opposite of a bull market. It’s a downward trend or a falling market. Investors are less likely to invest their money and don’t exhibit buying confidence. In fact, they are more inclined to sell their shares. A good example from history is the stock market crash of 1929, leading into the Great Depression. However not all bear markets are that extreme, in fact, to be considered a bear market, a price decline of 20% over a two month period is often accepted.
Money market instruments are short term debt obligations generally regarded as low risk, low to medium return investment for the holder. They are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower risks than most other securities. They have maturities ranging from one day to one year.
Making strategic decisions with one’s portfolio during a bear market in stocks can be useful. I have selectively made strategic buy or sell decisions for various stocks in my portfolio while still maintaining a very significant common stock exposure.
The harsh reality of the past year has been massive wealth destruction for all those investors and traders around the world who held on to falling stocks and:
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