What does that mean? It means you never try to game the market --- be patient... hold the course. And once you feel that everything is fine (which it always is long term) then you put some money to work. ONE DAY or TWO DAYS does not define a market - nor does it define your investments.
EVERYONE is expecting a TEN PERCENT CORRECTION.... we have not had one for quite awhile - - which means the longer we go without one - the less time we have until we have one. TEN PERCENT is a correction. Remember markets always average out. We've enjoyed a 30% RISE over one year! 10% back off that is no big deal.... Unless of course - you just got in and didn't get the 30%.... get over it - this happens all the time. Investing takes a great deal of patience and understanding that the market goes UP and it also goes DOWN. Live with it. If you own great stuff - which is EXACTLY why we buy great stuff - you will be rewarded.
Panic? The dogs can always outrun you and you will get eaten.
Try to THINK more institutionally. Move glacially. Don't be one of those stupid ass RETAIL INVESTORS the TV talking heads always laugh about.
A retail investor only puts money to work in an UP market -- and then they SELL the minute there's a loss. Everyone else makes their money off these idiots.
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A phenomena that may be at work and we will see increased rapid selling pressure for a short period. It's called MARGIN ACCOUNTS... Margin allows people to leverage their accounts to buy up to HALF of their account value on margin (meaning borrowed money). Because it's a cash on cash loan - the rates are very cheap. MARGIN is at an all time high. Why? Because people are emboldened in a big ass up market. The big ass up market has been going on since 2009.... and being leveraged like that has been "smart" (smart is debatable).
But --- when you're margined --- the brokerage can make a "call" on your account. Meaning that in a down market you must maintain that borrowing ratio. You have to have $1 in assets for every .50. In a down market that $1 asset might be only .80 and your ratio is upset. You are called by your brokerage and you have til the close of market that day to add money to your account. Failure to do so means they sell assets automatically to bring your ratio into line. It's a "margin call".
If the market is at record high ratio of margin.... which it is.... there's going to be a whole lot of selling .
People on margin will sell to cover their margin -- the more selling - the more margin idiots become freaked out and rush to cover -- or get a margin call... the more margin calls that can't be covered -- and the brokerage just sells indiscriminately... the bigger the quick down market we get... it's like a bloodbath in slow motion. More down means more selling - more selling means more down. Until all the lemmings are OUT. The TV talking heads call it "weak holders". Which is EXACTLY what they are. I call them IDIOTS... which is exactly what they are.
I expect a big couple sharp selloffs... 400 or 500 point days... That will get us to our 10% "correction". Not predicting this -- but this is the scenario that gets set up.
You begin to buy when the stocks you're looking at are down 7 - 8 - 9% NOT 1%
I love sitting here reading your posts Greg, I agree 100%. Everything "averages" out in the long run (emphasis on the word "long" term). And like you said, buy quality, watch the charts, know your companies.
Last time i checked, were still eating, going to the movies, buying toilet paper, putting fuel in the cars...maybe not as much, but were still doing it...(cept the toilet paper part...."insert imogee of happy face on toilet here")....
This is going to be a very tough year for me, I have money in several places. The pension we're setting up for my employees is taking for ever and biz is down 30%. Funny thing is, now is the time to go shopping for better employees, just like when quality stocks are down, go shopping. Interviewed two very good prospects yesterday for our shower door "division"....gotta watch the overhead and trends. Just like we do with the stocks we buy....
I L O V E Apple products... but that doesn't mean I can love owning the shares (I DO NOT).... because it's a lot of money tied up per share --- and the dividend is paltry. I just can't justify tying that kind of cash up even if the shares have GROWTH. I need the income...
And then we have today -- where they announced numbers AFTER the market... and note the RED after hours number. OUCH!
That by the way - does not mean it will trade up or down tomorrow during regular hours --- after hours trades usually are very few --- takes too much explanation here --- and isn't important... but you can feel the pain!
Now ---- it's been UP about 25% last year --- so you'd still be far ahead if you'd bought a year ago
550.50 +4.43 (0.81%)
After Hours: 506.04 -44.46 (-8.08%)
Jan 27, 7:59PM EST
So this is a "risky" post --- because some of you are investing in non taxable accounts -- and others are investing in IRA's -- and still others are doing both.
These strategies are all DIFFERENT yet investing is the same regardless of what type of account. They're different because of tax implications - and they're different because the non taxable accounts might be for a different purpose (investing for a house down payment etc).
Remember that I personally LIVE off my dividends and other investments... that's a completely DIFFERENT strategy from investing for retirement. I also pay attention to the markets (you have no idea how much time is spent doing this!)... etc. So what I'm doing and why you're doing something have completely different reasons etc.
I use three or four "stocks" for parking cash... JNK - HYG - NLY are the three main ones - and these are the names that have been mentioned in this thread repeatedly. I have also said that these names are used to PARK -- and in TEMPORARILY - cash. JNK and HYG pay a very nice dividend MONTHLY... so if a guy has some cash - he can buy these ETF's and you don't have to wait until the next quarter (3 months) to get some cash flow off them. NLY is a quarterly dividend payer and pays super high dividend percentage.... ALL THREE OF THESE NAMES ARE EXTREMELY INTEREST RATE SENSITIVE! They're the first names (this type) that get killed in a rising rate environment. So if you're not on top of what's going on -- you're going to check your account and you're going to have gotten creamed in this stuff. Leave these to the "active traders" accounts.
So that's all the "disclaimer" ---- it's IMPORTANT.... because this thread isn't about what to do or when or which name to buy and sell... but I can't write a post of Investing 102 without using something for examples.
I sold all three of these names this morning. I had gains in all three. I've picked up dividends off all three as well.... and I wanted to get some cash ready to pick on some more long term dividend payers IF ---- hello here! --- IF --- we get a "correction" (down 10% or so). I don't want to wait until that happens --- or some other event -- and loose money in my "cash parking names" --- so I'll just have to take a small gain while I have it -- and then SIT with employees on vacation -- until and maybe and IF -- we do have a small sell off..... and I'll put all those employees back to work. I had over 3MM in these three names... you guys might have 300 -- 3000 -- or 30,000 whatever it is doesn't matter... what matters is putting yourself in a position to go shopping if we go on sale. Think of it no differently than "Christmas is coming and I need to be ready". Christmas might get canceled.... and we never get the opportunity.. we won't / don't know that.... but if there's a sale --- I'm going shopping!! LOL
I'm not talking about down one day -- boom! I'm talking about a market that just "re-sets" --- a market that re-sets does so over weeks.... and it does it in a matter sometimes that you really don't notice it much. A couple bigger down days --- then some up --- then a week of just down here and there.
So how do I do this?? I have some names I want to add to and some I want to add. I will wait until these names are down 5 - 6 - 7 or so percent... and then I'll just buy a third or a quarter of them at a time. AVERAGING IN. Until I get the position I want. Remember that I can do this because I'm buying a few thousand shares. If you're buying 50 shares you can't do that -- so then you'd want to maybe wait until they're down 7 or 8%. There's no reason to try to wait until you think they're at the very "bottom"! That's nonsense and you'll never hit it. WE ARE LONG TERM.... so if you can just get some shares on sale a little BE HAPPY with that! They will recover... The shares you got on sale might help you average down a position you already have... or sometimes you might average your cost up - even though you bought shares this time on sale. The whole point is --- when stuff goes on sale - take advantage of it if you can and if you can. Don't be afraid of something (the market) just because it's on sale! We don't know how long it's going to be on sale... or when it's going on sale. But if it does... you should be happy.
Think about it like the guy that has been trying to sell his Camaro -- you'd like to own it -- but he's hold his price high and the market might even be going up... and he's thinking about raising his price... all of a sudden the market goes soft and he freaks out and drops his price 10K.... Like Charley did on his Mustang when I bought it! BAM! I'm happy as a clam to have swooped in a grabbed it! Think about stocks the same way. They are no different!!! Get your heads around that and you'll make some real money.
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