Stay “Safe” in Volatile Times
by Rob Tovell
May 12th., 2016
What’s an investor supposed to do with these manic, bi-polar market conditions?
How can an investor survive these turbulent and often violent market gyrations?
Next week, on May the 18th we will be discussing such topics via webinar in greater detail but in the meantime here are a few points you may want to consider:
1) Make sure you aren’t gambling. Don’t put on a trade or an investment just because you ‘think’ prices should do this or should do that. Wait until prices themselves start moving in the anticipated direction before pulling the trigger.
2) Are you being lazy? Do your homework! Just because you heard some gossip about a company, commodity, or currency at a cocktail party doesn’t mean it’s worthy of throwing your hard earned cash into it right away. Check the fundamentals, then check the charts. If they are both telling the same story, then perhaps you could ease yourself into a small position, and see how it performs before committing to a larger position.
3) Make sure your investment idea has it’s sectors ‘blessing’. Even a profitable company with great management can see it’s share price fall dramatically if that company is in an industry or sector that is ‘out of favour’ with investors. Wait for investor interest to return before jumping in. The last thing you want to do is try and catch a falling knife.
4) Don’t do business with the government. Government is often brought into companies to bail them out. If a company has recently recieved a government infusion of cash, stay clear of it!
If you are playing the short term or you are a day trader, do not take a position before a major report. This one I know and should be obvious and it relates back to point 1. Don’t take a trade infront of a report (earnings, economic, etc.). No matter what the gurus say, doing such a trade is gambling.
Last but not least, learn how to properly use options. In my opinion, there is no better way to create income, reduce risk, and enhance returns on a portfolio than by using options conservatively and in the way they were designed to be used. Options get a bum wrap because they are typically promoted and used as vehicles for speculation with limited risk. Total nonsense! BAD IDEA! Believe it or not, only on very rare occasions and under very special circumstances is it wise to take a trade using options alone.