Nov 07. Credit worries have hit the market again - stocks are heading down. This is where having a strategic portfolio is really important. Often when the markets start trending down - a lot of stocks are dragged down whose value and business are still solid or that present solid growth opportunities in the future.
My strategy is really to have a portfolio of stocks that you are interested in - watch them and get to know them well. At times they be expensive and may not be worth buying but when the markets go into sell mode - they present real value. I suggest you buy companies that will be able to ride out the current storm. They should benefit the most from a rebound in the market.
Now it is important to realise that investments may not raise as the economy enters and rides out the recession. You may also find that even after you buy - the stock still trends down. Well - don't panic. I suggest buying in smaller lots than usual - buy on the dips (this will give you an average price - just be careful that your lots are not too small - otherwise you will only see an increase in transaction costs). I like to buy stock directly after a sever fall - but be careful what you buy.
A year or two from now these are the stocks that will drive your returns...as the economy rebounds - they stand to raise the most. This may also be the time to enter into some longer dated options - that is if you are able to digest a bit more risk. Think longer term...don't sweat the small stuff or the short term.
