| A correction is a beautiful thing, simply
| |
| | meets the eye, and you run out of cash
|
| the flip side of a rally, big or small.
| |
| | well before the new rally begins.
|
| Theoretically, even technically I'm told,
| |
| | 6. Your understanding and use of the
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| corrections adjust equity prices to their
| |
| | Smart Cash concept has proven the wisdom
|
| actual value or "support levels". In
| |
| | of The Investor's Creed (look it up). You
|
| reality, it's much easier than that.
| |
| | should be out of cash while the market is
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| Prices go down because of speculator
| |
| | still correcting... it gets less scary
|
| reactions to expectations of news,
| |
| | each time. As long your cash flow
|
| speculator reactions to actual news, and
| |
| | continues unabated, the change in market
|
| investor profit taking. The two former
| |
| | value is merely a perceptual issue.
|
| "becauses" are more potent than ever
| |
| | 7. Note that your Working Capital is
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| before because there is more
| |
| | still growing, in spite of falling
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| self-directed money out there than ever
| |
| | prices, and examine your holdings for
|
| before. And therein lies the core of
| |
| | opportunities to average down on cost per
|
| correctional beauty! Mutual Fund unit
| |
| | share or to increase yield (on fixed
|
| holders rarely take profits but often
| |
| | income securities). Examine both
|
| take losses. Additionally, the new breed
| |
| | fundamentals and price, lean hard on your
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| of Index Fund Speculators is ready for a
| |
| | experience, and don't force the issue.
|
| reality smack up alongside the head.
| |
| | 8. Identify new buying opportunities
|
| Thus, if this brief little hiccup becomes
| |
| | using a consistent set of rules, rally or
|
| considerably more serious, new investment
| |
| | correction. That way you will always know
|
| opportunities will be abundant!
| |
| | which of the two you are dealing with in
|
| Here's a list of ten things to think
| |
| | spite of what the Wall Street propaganda
|
| about doing, or to avoid doing, during
| |
| | mill spits out. Focus on value stocks;
|
| corrections of any magnitude:
| |
| | it's just easier, as well as being less
|
| 1. Your present Asset Allocation should
| |
| | risky, and better for your peace of mind.
|
| be tuned in to your long-term goals and
| |
| | Just think where you would be today had
|
| objectives. Resist the urge to decrease
| |
| | you heeded this advice years ago...
|
| your Equity allocation because you expect
| |
| | 9. Examine your portfolio's performance:
|
| a further fall in stock prices. That
| |
| | with your asset allocation and investment
|
| would be an attempt to time the market,
| |
| | objectives clearly in focus; in terms of
|
| which is (rather obviously) impossible.
| |
| | market and interest rate cycles as
|
| Asset Allocation decisions should have
| |
| | opposed to calendar Quarters (never do
|
| nothing to do with stock market
| |
| | that) and Years; and only with the use of
|
| expectations.
| |
| | the Working Capital Model (look this up
|
| 2. Take a look at the past. There has
| |
| | also), because it allows for your
|
| never been a correction that has not
| |
| | personal asset allocation. Remember,
|
| proven to be a buying opportunity, so
| |
| | there is really no single index number to
|
| start collecting a diverse group of high
| |
| | use for comparison purposes with a
|
| quality, dividend paying, NYSE companies
| |
| | properly designed value portfolio.
|
| as they move lower in price. I start
| |
| | 10. So long as everything is down, there
|
| shopping at 20% below the 52-week high
| |
| | is nothing to worry about. Downgraded (or
|
| water mark... the shelves are beginning
| |
| | simply lazy) portfolio holdings should
|
| to become full.
| |
| | not be discarded during general or group
|
| 3. Don't hoard that "smart cash" you
| |
| | specific weakness. Unless of course, you
|
| accumulated during the last rally, and
| |
| | don't have the courage to get rid of them
|
| don't look back and get yourself agitated
| |
| | during rallies... also general or sector
|
| because you might buy some issues too
| |
| | spefical (sic).
|
| soon. There are no crystal balls, and no
| |
| | Corrections (of all types) will vary in
|
| place for hindsight in an investment
| |
| | depth and duration, and both
|
| strategy. Buying too soon, in the right
| |
| | characteristics are clearly visible only
|
| portfolio percentage, is nearly as
| |
| | in institutional grade rear view mirrors.
|
| important to long-term investment success
| |
| | The short and deep ones are most lovable
|
| as selling too soon is during rallies.
| |
| | (kind of like men, I'm told); the long
|
| 4. Take a look at the future. Nope, you
| |
| | and slow ones are more difficult to deal
|
| can't tell when the rally will come or
| |
| | with. Most recent corrections have been
|
| how long it will last. If you are buying
| |
| | short (August and September, '05; April
|
| quality equities now (as you certainly
| |
| | though June, '06) and difficult to take
|
| could be) you will be able to love the
| |
| | advantage of with Mutual Funds. So if you
|
| rally even more than you did the last
| |
| | over think the environment or over cook
|
| time... as you take yet another round of
| |
| | the research, you'll miss the party.
|
| profits. Smiles broaden with each new
| |
| | Unlike many things in life, Stock Market
|
| realized gain, especially when most Wall
| |
| | realities need to be dealt with quickly,
|
| Streeters are still just scratchin' their
| |
| | decisively, and with zero hindsight.
|
| heads.
| |
| | Because amid all of the uncertainty,
|
| 5. As (or if) the correction continues,
| |
| | there is one indisputable fact that reads
|
| buy more slowly as opposed to more
| |
| | equally well in either market direction:
|
| quickly, and establish new positions
| |
| | there has never been a correction/rally
|
| incompletely. Hope for a short and steep
| |
| | that has not succumbed to the next rally
|
| decline, but prepare for a long one.
| |
| | correction...
|
| There's more to Shop at The Gap than
| |
| |
|
