Monday, May 04, 2020

Preparing for Further Market Declines

"It's hard to make predictions, especially about the future." ~ Yogi Berra

As Warren Buffet said, " I don't think anybody knows what the market is going to do."   IMHO, if they did, they wouldn't be telling the world :-)

I admit, I have no clue as to what the market will actually do.  However, I do know that a significant decline of our investments is much more troublesome than mission out on significant gains.  Thus, from a risk perspective, I'm preparing for a further market decline.  Here's what I'm doing:
  • Selling into rallies and taking profits.  I was a buyer from January to March, mostly in energy stocks.   So I'm taking profits when I get a 15% gain or greater.  Unfortunately, I'm still underwater for the majority of my energy purchases, but am willing to wait.
  • Buying CDs.  Mostly 1 year or less.  Even though the rates are less that 0.5%, it's still better than 0.01% in the bank sweep accounts. 
  • Putting in low ball limit orders.  I want to buy after the market falls significantly.  I have submitted some low ball good-til-cancelled orders for stock that I already own and still like.
  • Keeping cash to invest.   When market falls, I will be scaling in with small purchases.   Hopefully, I will start buying near the bottom, but, if not, I will be dollar cost averaging down.
I believe the stock market has over estimated the speed of the recovery from the lockdown.  Once the reopening shows some sputtering, the uncertainty will cause the market to pause and  decline.

For more on Strategies and Plans, check back Mondays  for a new segment.

This is not financial nor investment advice. Please consult a professional advisor.

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