In recent weeks, we’ve been seeing some exchange traded funds (ETFs) start to pop above their 200-day moving averages. Eventually, we will be in a new bull market. What can you do to be ready for it?
There is no way to tell when the market will definitely turn around and re-enter bull territory, but there is no question that it will eventually.
As an investor, there are some things you can do to be prepared. Brett Arends for The Wall Street Journal has 12 tips to share:
- Go Global. Staying on domestic ground is not the safest or smartest strategy. Two-thirds of the world’s market cap lies outside the United States. By putting your eggs in a few different baskets and covering overseas markets you can diversify and spread out your risk.
- Avoid Big Moves. Buying and selling heavily in one session is not a smart thing. Wait, watch and follow market trends, be thoughtful and methodical. This way your decisions will not be rash or emotional.
- Investors Are the Markets. Remember that when everyone is trying to predict “the market,” they are effectively chasing themselves through a hall of mirrors.
- Past, Present, Future-Be Aware. Shares are rising, have risen, will rise, all have different meaning. Pay attention, and do not follow the leader. This ties into point number three – watch the trends for signals.
- Diversification That means investing across a spread of different asset classes and strategies. Asset class blends do not equal diversification. On the flip side, be aware of over-diversification and taking on more than you can manage.
- Forecasts Are Simply That. Nobody has a crystal ball-NOBODY. Take forecasts with a grain of salt, and wait for actualities before making your move.
- Understand What You Are Doing. The stock market has infinite risk tolerance and an infinite time horizon. Real people can’t compete with market indexes, and shouldn’t try. Don’t buy things you don’t understand – a case in point is short and leveraged ETFs. Some investors have bought them and gotten burned because they didn’t understand how they should be used.
- Who Is TINA? Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. There are always alternatives.
- Do Your Own Thing. Do not become a part of the herd. That was left behind in grade school.
- Patience. Opportunity comes around many times. If you missed one, another will come, just wait.
- Don’t Sit Out Too Long. Small investments in increments is better than all at once. If you are afraid to invest, do it early, little and often. If you’re still finding it difficult to buy, even when all signals say yes, try researching your position and finding evidence to back up why you’re taking it. Seeing fundamental reasons for your choice can make it easier.
- Price Matters. An investment is just a claim check on future cash flows, whether it be a company’s profits, a bond’s coupons or an annuity’s income stream. Pay attention: shares in a solvent company are twice as good at half the price… and vice versa.
For more information on investing in ETFs and strategies you can use, visit our education page, which has a wealth of information and links to some of our most helpful and informative articles.
To discuss with others how they’re handling re-entry into the markets, visit our forums. Over there, people are talking about stop losses, moving averages and where they are in the markets right now.
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.