What Investment Strategy Is Best In This Stock Market?
Bearish periods are notorious for upending traditional investment strategies. Therefore, maintaining bullish attitudes and approaches is usually futile in a downturn. Instead, we need to adopt a bearish investment strategy to succeed in this stock market.
First: Be fast.
Downturns occur quickly. Therefore, investment success requires speedy shifts.
Second: Reject “sophisticated” risk reduction strategies.
The key problem is trying to allay down market worries while staying fully invested.
Third: Invest in some cash.
When stocks or bonds produce losses, cash is the clear winner. Additional benefits from holding cash are:
- A calmer demeanor that allows making better decisions and avoiding emotionally driven mistakes
- The funds for buying attractively priced investments
Fourth: Reduce importance of stock fundamentals.
In normal times, forward earnings and growth potential are important fundamental stock measures.
In bearish times, however, they become weak – not because they are ignored, but because the concerns and uncertainties around the fundamentals reduce confidence in the numbers, themselves.
Fifth: Avoid screening for stocks to buy.
There are insurmountable problems to performing screens in downtrends.
Earnings and growth data are unreliable
Higher dividend yields (currently being used in articles recommending stocks) are questionable
Low price picking has bad rationale
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