In summary, if you sell now, you may be getting out at the bottom, but it could get worse. Take a piece off the table, especially in your more volatile positions. Global Trends Investments (our management company) has had a large cash position since early December as most major market indicators and their corresponding ETFs have hit their sell points.
Setting stop-loss points for equity positions, either 8% off the recent high or if the holding declines below its 200-day moving average. Currently, this puts most funds in a sell mode. In an effort to not sell at the bottom, consider selling one-third of equity holdings and buy when the stock goes back up above its 200-day moving average.
Not only will this help emotionally, it does something to help avoid a larger impact if the markets continue to decline.
But what if you missed the 8% drop, and you’re down much further than that? The question was posed to us by a reader this weekend in response to this post.
Missing the sell point creates the conundrum above. That’s when I recommend the following:
- Sell 1/3 of your equity holdings and focus on the most aggressive positions. Some of these might be the top performers in 2007. While they’ve declined 20-30%, they are currently 10-15% below their 200-day moving averages.
- If those holdings decline by another 5-7%, consider selling another third.
- Keep an eye on the 200-day average of these positions. As the trend lines continue to decline, there will be an excellent buying opportunity in the future when the markets eventually rebound.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.