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…I don’t like it when the market goes down OR up 10% a day…[so I personally plan] to wait until there are a few days or weeks of stability…[even though] I also think right now is a bargain. [Below are my 6 rules for investing in a crisis market like we are now experiencing.] @A Financial Site For Sore Eyes & Inquisitive Minds
Rule #1: Never try to call the bottom
…Don’t use what’s called “leverage” (i.e….buy on margin).
Rule #2: While some say, “Buy when there is blood in the streets,” I don’t like to do that
…Wait until there is some decent data out there…[before entering the market]. The market might not be 33% down by then – it might just be 20% down – but there will still be MANY, MANY bargains.
Rule #3: Don’t fight the Fed
The Fed just put in a bunch of stimulus…[which should] be fully seen in the economy within six months…[although] the market will anticipate it before then.
Rule #4. Look at what’s changing: drones, robotics, oil, delivery, remote education, video conferencing
There are probably opportunities here that nobody realizes yet.
Rule #5: The 3% rule
If you are buying stocks (as opposed to mutual funds or ETFs), never put more than 2–3% of your portfolio into any one investment…If…[you are] too dependent on one stock…[you’ll] have trouble sleeping at night.
Rule #6: Risk over return
Manage risk over return. If you take huge risks, you won’t think straight.
- Don’t get leveraged
- Know when you plan to get out of a stock that’s going down as well as going up
- Use a “story stop,” not a price stop. Get out when the story changes
- Don’t just buy something because it’s down. Look for things that have a variety of reasons for upside potential and a variety of reasons why downside is limited
- Do your own research.
WHAT TO LOOK FOR RIGHT NOW
- …Stability in the number of new deaths per day…
- Signs that the lock down here will be over. Every day of the lock down is another possible hit against GDP. The lock down might be OK, but the uncertainty of its length will keep driving the market down more.
I personally would wait but I also think right now is a bargain. I just don’t like when it goes down OR up 10% a day. I like a few days or weeks of stability…