So the Debt was Downgraded....
How you can STILL be a successful investor
Doom and gloom is particularly hard to deal with because it becomes a pervasive force, blanketing the whole economy with a shroud of malaise. It is easy to fall into the trap of taking all your money out of the market. To a certain extent, this mentality is to be expected. Phrases such as "debt downgrade", "double dip recession" and "permanent unemployment" have a nasty ring to them. With the market falling over five percent in one day, some "investment experts" on cable television have fanned the flames by encouraging investing to flee the market and eat their losses. The reality is that this is a perfect time to start investing in the market. Whether you have a portfolio already, or you are waiting on the sidelines, the single greatest opportunity to increase your net worth may be at hand.1) Be Conservative Without Being a Miser
Just because there is tremendous opportunity right now in the market does not mean you should jump headfirst into the first opportunity you see. There are many good opportunities, but take the time to find the truly great opportunities. Why settle for decent returns when you can do better? This is why you should be conservative even while looking for opportunities to invest. Do not lower your standards for high quality companies. In this market, you WILL find the great value bargains.
2) Don't Ignore the Fundamentals
Going off of the conservative mindset, make sure you still check the companies fundamental valuations before putting your money into play. While much of the stock market declines can be attributed to general economic malaise, some companies still deserve to be trading at rock-bottom levels. In particular, pay attention to things like Free Cash Flow, Entity Value, P/E, ROE, and ROIC. Don't change your investing philosophy in mid-stream just because the market is down.
3) Look for Dividends, But Also Growth
With unpredictable prospects for strong future U.S. economic growth, many investors are fleeing small cap growth stocks in favor of the older established names that are paying a cushy looking dividend. While this is not a bad idea to protect your wealth and earn some cash on the side, it is not a strategy in and of itself. Many investors treat growth stocks and dividend stocks as if they are mutually exclusive. They are not. You may have to settle for slightly lower dividend payments, but there are many quality growth stocks in the market that are trading at discount valuations, yet still command a steady dividend payout.
4) Don't Watch CNBC
Stop watching the economic "experts" predict the future. They are wrong, most of the time. Develop your own strategy for investing.
5) Adopt a Long Term Approach
It may seem scary to see all that red ink on your portfolio statement, but be prepared to take some losses for a while. Even as you buy more de-valued stocks, don't panic if they drop lower and do not immediately go up. Even if the market has not hit the floor yet, it is still a good strategy to buy all the way down until it does. Think about where your portfolio could be in 2-5 years, not the next few weeks, or even the next 3-6 months.
0 comments:
Post a Comment