Dear readers, in my recent post, I shared why stock markets corrections have already started! As a quick recap, my comments in the aforementioned post came after noting how the 20-days moving average of the Straits Times Index has been failing to move above the 100-days moving average and is currently trending down. From this noting, I am of the view that corrections to the stock markets are already on the way, waiting for the trigger to the stock markets.
And the trigger could be arising from this additional reason which I am going to share with you (on why market corrections are likely on the card soon) right now. This trigger is none other than probability. If probability is a good gauge, September is a month where the stock markets in general fared the worst or one of the worst in a year.
There, investors have them: one technical analysis frame and one probability frame combined on why stock markets are going to have a correction soon!
I know, some of you may be telling me not to time the stocks markets for some investment gurus out there recommend to stay invested in the stocks markets all the time and invest regularly into the stocks markets come market corrections or not (and during markets correction). I think this method is called dollar cost averaging.
I do not know how you feel about dollar cost averaging. But to me, dollar cost averaging also hinges on assumption and that assumption is that stock markets are going to rebound back after correction in a span of just few years after stock market correction. But that assumption is still just an assumption. So what happens if you have invested $1 million into the stock markets and the stock markets recover back only in 10 years’ time? You would have had to hold on to your $1 million or risk selling your stocks below cost. You would also have to miss out on the opportunity cost of your $1 million.
What if you reserve your $1 million to invest in the bottom of the stock markets corrections when it is much clearer that a rebound on the stock markets is coming? You would have a better opportunity to profit on your capital and liquidate your profit sooner.
I have recalled. I have recalled a better name of my “timing the market” strategy. It is called contrarian investing: buy when others are sell (for stocks will be at a discount).
So what do investors do now, while waiting for the stock markets corrections? Well, as what I have always been sharing, continue to build up your investment warchest, build up liquidity.
And I leave you with another financial term in this post before I leave this post: “Cash is King” especially when all other investors are fleeing the stocks markets! There we have it, the terms in this article: “time the stock market”, “contrarian investing”, “investment warchest” and “cash is king”. One additional advice, do not always feel that you have to be in the stocks markets all the time to earn money by active trading etc. Waiting for good buying opportunities is also a good strategy.
There, we have, the post for today from SG Stocks Investing. Please remember everyone has different investing strategies. What works for me may not work for you. What works for you may not work for me. As the cliché goes, the proof is in the pudding!