Saturday, August 22, 2015

It's Probably Going to Get Really Ugly

The 1017 point drop in the Dow this week has wreaked havoc on my investment portfolio.  Unfortunately, I believe the indices will continue to fall next week.  At this point,China and the Fed have lost their economic credibility with the market.  Hence, I expect the selling will continue.

One factor that may contribute to a steeper decline is the high level of existing margin debt.  As stock prices fall, accounts with margin debt may receive margin calls that require further selling of stock. I have also read that the emerging market currency crisis may be another factor causing a stock market decline, just like in 1998.

Right now, I'm anticipating at least a 20% drop in the market indices.   During that time, I will be trickling in a small amount funds into commission free broad market ETFs.  In addition, I will make some small purchases of specific stocks to build our retirement dividend portfolio.    For now, I don't expect to put more than 20% of our cash position back into the market.

For more on  Reflections and Musings, check back Saturdays  for a new segment.

This is not financial advice. Please consult a professional advisor.

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