Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

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

© 2005-2019 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

6 Critical Money Making Rules