Or better still, are you acting? 

 

The tone of the Market has Changed

Since Oct. this is a bit different than what we’ve seen since Spring of 2016 for the S&P 500 (and June of 2016 for the Nasdaq) in that the market is content to spend time below it’s 200  day moving average (dma)  - Here is a post why that is significant - The 200 Day Moving Average

 

Heck, for all of 2017 the indexes didn’t even approach their 200 dma let alone close below it.

 

It might be time to review your Holdings


If you have individual stocks in your portfolio, you may have  decisions to make for each holding – example:

  • Do you want to lock in profits or is the stock strong enough to sit through a possible lengthy correction
  • How much room do you want to give under-performing holdings before you sell 

    • My personal preference is not to let a stock go below 7% regardless of what kind of market it is – the reason is two-fold:

o   This protects capital and

o   Confidence

  • It hurts to see the stock rebound.  However, you’ll find more often than not, that it was the right move because the stock will continue to fall and if you take a big hit, that can take a while to recover from (financially and psychologically). 

 

Cash is a Position

You don't have to be 100% invested at all times. 

Individual Stocks can fall longer than most people believe, and in that time, a stronger competitor may surface that makes it difficult for fallen stock to win back the attention of Institutional Investors – meaning recovery off the lows will be challenging at best.

 

Dollar Cost Averaging 

I also do not subscribe to the theory of buying more of a stock at a price less than what you originally paid   (or, as they say, lowering your dollar cost average).   To me, it makes more sense to add to a position at a higher cost than your original purchase price - because the stock is proving itself a winner. 

If the stock has gone down from my original price, it’s indicating something is wrong, or at least that the catalyst for what I thought could trigger a sustainable upward move is not occurring and may occur later or not at all.  

 

The Market Doesn't Care What You Want


It’s important to remember, a stock does not care what you want or expect from it.  It  also doesn’t care what you think or your Broker thinks it
Should be worth.  The Market dictates the value of equities, regardless of what individual investors or  Brokers Think the equity should be worth. 


Don't let your ego get in the way of making sound decisions. 

 

I think this is a weakness of many Financial Professionals, their expansive knowledge of macro/micro economics (or maybe just hubris) keeps them from making the correct decision because the Stock should certainly be valued for what they think it is worth - right?  Wrong, it's only worth what the Market say's it's worth.   


Arguing with the Market is like arguing with your wife - it's a no win situation. 

 

This post does not refer to Mutual Fund or ETF investing, just individual stocks and it was written by an Insurance Man not an investment professional - so you may have just wasted the last 3 minutes of your life, but probably not. 

 

 

posted by: dan@hebbeln-ins.com

 

Posted 2:41 PM

Tags: stocks
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