Rev Shark:
When the Market Turns, You Won't Be Left Behind
4/4/05 8:32 AM ET
"The reason why worry kills more people than work is that more people worry than work."
-- Robert Frost
There are many good reasons to worry about this market; rapidly rising crude oil prices, signs of inflation and increasing interest rates are the most prominent, and these concerns are clearly reflected in the technical condition of the indices, which are extremely weak and struggling to hold at recent lows.
What happens to many investors in a poor market environment like this is that they spend all of their time and energy in unproductive worry. They feel incapable of action and don't try to better position themselves. The inclination is to embrace the arguments that good times are just around the corner and that if we are patient just a little bit longer things will turn and all of our problems and worries will disappear.
Maybe that will happen but the losses while you wait can put you in a deep dark hole that won't be escaped easily even if the market does begin to rally. In poor markets like this the hardest thing to do is to take precautionary action. We just want to ignore it and hope that things will look better later on. The long-term buy-and-hold investing strategy suddenly becomes much more appealing because it allows us to ignore the short-term pain and focus on hope for tomorrow.
The best thing you can do in this market is bite the bullet and deal with it head on. If your portfolio is bleeding, raise some cash and play defense. When the market does start to look better you can reenter and the likelihood is that you will be able to find plenty of good stocks that are even cheaper than they are today.
You aren't going to miss the big move in the market if you raise some cash and wait for better technical action; good markets will give you plenty of time to put your capital to work. If you miss the first few days, or even weeks, the likelihood is that you are still further ahead if you played good defense.
Traditional Wall Street's idea of defensive investing is to sit and do nothing while your stocks sink. Don't fall into that trap. Do some selling in poor market environments and don't worry about being left out. You won't be.
Oil is up again strongly this morning and the indices are struggling. There were some hopes Friday that the weak jobs report would relieve some of the inflationary pressure but the ISM prices paid report ended that hope. So now we have both weak economic growth and inflationary pressure. It's a tough one-two punch for this market to contend with.
Thanks to Cody for doing a nice job filling in last week. I appreciate it greatly.
Gary B. Smith:
