Tag Archives: stock market

How I Take the Bite Out of a Downward Stock Market Trend

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Overall, I’m a dollar-cost averaging investor so I do receive some benefit in my account when the market has dips.

However, when the market has days where it dips 600 points in the DOW in one day, I still feel the pain.  Or at least I did in the past.

These days as long as the stocks that I own have value, I just let them ride.  It’s never good and quite disheartening to cash out at the bottom of a deep dip in the stock market, only to see it rebound the next day.  When I was younger I would occasionally make this error, but now I just leave the stocks I have invested in the market go because the stocks that bought have a good story and financial figures.

Still, it’s a bit painful to watch the value of your portfolio drop, so I created a little distraction to take some of the pain out of a downturn in the market.

Here is what I do:

  1. Keep a small position in cash that I use for play money (not much, just a few thousand)
  2. I divide the money into 2 or 3 parts.
  3. I follow and invest in a favorite stock that I know very well.
  4. I buy the stock as long as the market falls (and the stock falls in price too).
  5. I do the purchase of the stock in a Roth IRA, that way I avoid the capital gains tax.
  6. If the stock market falls by another large percentage, buy more with the second amount.
  7. If I have a third amount, and the market continues to drop, I buy with the last amount.
  8. Next I wait for the market to recover, knowing that I got great low positions on my purchases of my favorite stock.

This process is what I use to take the bite out of a down market.  It’s more of a game than a real investment strategy, but at least I’m not as upset when the market is in a downward spiral.

There you have it,

MR

Another Big Stock Market Dip, What Did I Do?

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Yesterday, the DOW stock market measure dipped 187 points, so what did I do?

I did nothing!

The market responded to something going on over in the Chinese government as they try to control inflation in China.  I’ve seen similar announcement like this before, the market drops like a bowling ball dropped in a toilet, then during the following week,  it recovers its losses.  In some way it’s like a broken record…

What I should have done was buy more quality stock or other investments while the market was low, but I froze.  I actually have money sitting. waiting for such a dip, but it’s hard to take that leap of faith, and I hesitated.

The market also took new about Walmart sales dropping slightly for same store sales.  But like last year and the year before that, it’ll be the day after Thanksgiving and the amount of shoppers out in the market on that day, that will determine if holiday sales are boom or bust.

I’ll admit, part of the reasons I hesitated was because I didn’t have any particular stocks that I wanted to buy.  The reason I didn’t have any stock that I was looking at, was not because of any stocks per se, but instead because I hadn’t really been following the market as closely as I usually do.

If I had done my homework, and had a stock lined up…  I might have jumped in.  Even with a stock lined up though, it’s still a hard decision when the forces that be are knocking the market down like a UFC fighter (like the old version of Chuck Liddell) throwing a knockout punch.

Most of us follow our hearts and stay put in such market downturns, or even worse sell shares…

Was anyone brave enough to jump in yesterday?

-MR