Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fiscal Cliff Investment Opportunities

Stock-Markets / Investing 2012 Nov 20, 2012 - 06:43 AM GMT

By: Money_Morning

Stock-Markets

Keith Fitz-Gerald writes: Many investors believe that a fiscal cliff "dive" is inevitable.

Even with the prospect of a deal lifting the markets yesterday, I can't say I disagree.

The blame game has already started and it's highly unlikely that we'll see anything other than more foolishness out of Washington. And so far all they have done is kick the can down the road to date.


So what can you do about it? Believe it or not, crises like these can be an ideal time to buy stocks. And gold. And oil. And certain kinds of bonds. And more.

The death of financial markets is almost always highly overrated.

Adding insult to injury, fiscal cliff or not, trying to time the markets is an exceptionally bad idea - 85% of all buy/sell decisions are incorrect, according to Barron's. Further, Dalbar data shows that the return of an average investor trying to time the market is a pathetic 1.9% per year versus the S&P 500 return of 8.4% over the same time period.

Over 20 years, that's the financial equivalent of taking a 342% hit in lost performance.

With that in mind, here's a five-point plan for turning the fiscal cliff into an outstanding opportunity.

1) Get ready to go bargain hunting
With Europe entering another recession and some parts of the world flirting with a protracted slowdown that's going to be more like a managed depression, things couldn't be more uncertain.

While I don't personally like this reality any more than you do, from an investment perspective I'm very happy to pick through the oversold stocks and go bargain hunting.

Why?

Because history's rearview mirrors show that fear, panic, crisis and stress are all classic signs associated with opportunity -- and profits.

This is particularly true for choices related to energy, resources and certain kinds of technology - all of which the world needs, as opposed to wants, and all of which are backed by billions of dollars flowing their way whether we go over the fiscal cliff or not.

2) Stress test yourself
Never mind the big banks or Wall Street's hooligans, take a good hard look in the mirror.

Many investors are completely unprepared for the psychological impact of our nation going over the edge. And you don't want to be one of them.

Read the fine print on your brokerage statements. Imagine what would happen if the markets drop even further. Are you prepared to go on the offensive? Can your portfolio handle a stock market plunge, or will you be left grasping at straws when the smoke clears?

Focus any discomfort you feel into something productive, like realigning your expectations, your portfolio and your investing tactics so you can capitalize on the opportunities a fiscal cliff dive will create.

The 50-40-10 model I recently addressed in this webinar with US Global CEO Frank Holmes is a great place to start because it ensures a constant blend of safety-first choices, discipline, and upside.

3) Decide under what conditions you will sell.
Many people assume that we will wake up one day and somebody will announce that America's gone over the fiscal cliff.

I don't think that's the case. The markets are already adjusting to that possibility and, while panic hasn't set in, it's only a matter of time if our leaders can't get their act together.

When that happens, the last place you want to be is standing on the sidelines wondering what to do.

Decide now - ahead of time - under what conditions you are going to sell and why.

Your decisions can be part of some elaborate plan or as simple as a 25% trailing stop. It really doesn't matter. That you are prepared ahead of time does.

This strikes some people as defeatist. That's nonsense. No investor has to suffer the ravages of a bear market if they've prepared ahead of time.

4) Make consistency your mantra
Despite unbelievably challenging fundamentals and more than 12 years of disjointed markets, many investors remain hypnotized by the promise of buying something cheap and having it turn into the next Google (NYSE: GOOG), Apple (Nasdaq: AAPL) or Amazon (Nasdaq: AMZN).

This baffles me but I can understand their thinking. You've probably heard as many stories as I have over the years of people who have "made it big" buying some obscure company that turned into a gold mine. The greed gland is pretty powerful.

Just remember that huge profits come with huge risks. What people don't talk about is the fact that many of the most famous traders of our time - guys like Rogers, Soros, and Paulsen for example - work with huge amounts of capital and leverage.

Unless you are prepared to accept the risks like they do as part of a carefully disciplined overall investment plan, don't play the game. Volatility is not for the faint of heart.

For everyday investors, the real path to financial freedom and success over time is through smaller, consistent winners and making fewer mistakes.

This speaks to an investment philosophy grounded in strategies with higher probabilities of success like an emphasis on income and total returns, fortress-like stocks with "glocal" capabilities, put selling, resources and disciplined risk management.

Not coincidentally, those are all key attributes of our sister service, the Money Map Report.

5) Recognize that not all risks are the same
Wall Street's lawyers love to point out that all investments involve risk. I agree. But that's only half the story. What they don't tell you is that not all risks are the same.

That's why we prefer large "glocal" companies that are generally characterized by globally recognizable brands, have fortress-like balance sheets, and have long histories of raising dividends over time.

That's not to say there isn't a place for small cap stocks in your portfolio at the moment. There is -- especially when you can identify a specific catalyst for future profitability like a patent or innovative game-changing technology.

My favorite small caps right now are related to medical, bio, and defense tech. All three segments are game changers that quite literally could affect millions of people and produce some outrageous returns, too.

Just keep the risks in line with the rewards.

Source :http://moneymorning.com/2012/11/20/....

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in