Editors' Pick Portfolio Strategy

How To Invest In A Down Market

Mar. 08, 2021 2:59 PM ET | CRWD, FSLY, MDB... | 131 Comments | 189 Likes

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Summary
The Nasdaq is close to correction territory, about 10% down.

Many high-quality businesses are seeing their stock down 20% to 50%.

Market sell-offs are generally not a good time to sell or rebalance.

Recognize you are likely to make emotional decisions right now.

Let's review the kind of investments you should be focusing on.

This idea was discussed in more depth with members of my private investing community,
App Economy Portfolio. Learn More »

How To Invest In A Down Market

Image Source: CNN Money

This week was the biggest market sell-off since, wait for it... September 2020.
I know, six months ago is not really a big deal. In fact, market corrections (a market sell-off of
10% or more) happen more than once a year on average. And generally speaking, when people
refer to "the market," they are talking about the S&P 500 (SPY), not the Nasdaq (QQQ). From
this perspective, the market has barely moved. The recent sell-off is predominantly affecting
the Nasdaq with a rotation out of high-growth technology companies and into businesses that
have taken a beating throughout the pandemic (live events, brick-and-mortar retailers, hotels or
travel to name a few).

Chart

Data by YCharts

Many analysts and so-called market pundits would want you to believe it's the end of the world.
Looking at a few headlines over the years, my own anecdotal evidence here on Seeking Alpha
is that some authors are simply perma-bears who will tell you that it's time to sell your stocks
and hunker down every month of the year. When the market is hitting a new all time high, they
say that valuations aren't sustainable and we are in a bubble. But when the market falls by 30%
like it did in March 2020, they say that stocks have a lot more room to fall and you should still
stay away.

For the pessimists, the right time to buy is almost never. Too bad for them, because they are
missing out on one the most fantastic ways to create wealth over a lifetime. I'm talking about
long-term investing in equities.

Going back to the sell-off at play today, many high-growth stocks are down 20% to 50% from
their previous high. But it's essential to note that many of them are merely trading back to
where they were a few weeks ago. Just look at Tesla (TSLA). The last time the stock was
trading just below $600 was just three months ago, at the beginning of December.
 Chart

Data by YCharts

I've covered before the five ways to prepare for a stock market crash:

1. Ask yourself how much drawdown you can cope with.

2. Make sure you have the cash you need.

3. Build a portfolio that suits your risk profile.

4. Build a wish list of stocks to buy on sale.

5. Write down your strategy.

If you follow this approach when the market is chugging along, going through the volatility of
the past few days becomes incredibly easier. I would even argue that it becomes an enjoyable
process because you get to execute a well thought-out plan and benefit from your
preparedness.

Most investors are already familiar with what I would call "Investing 101." Among the first
lessons you learn when starting investing, you often hear what is critical to do when the market
crashes:

Don't panic.

Stay the course.

Focus on the long term.

The problem with these lessons is that they can be a bit superficial. In theory, many investors
understand they should not sell their holdings in a stock market crash and just let it pass. But
in practice, there can be a strong temptation to tinker with a portfolio, re-balance aggressively
at the worst possible time, or using the majority of your cash reserve too fast and miss great
opportunities to invest if the market continues to fall.

So I want to go a bit deeper today, offer some perspective and share investing strategies you
can choose from.

Understanding Bull and Bear Markets

The market has historically gone up over time, with an average 10% annual return over the last
92 years for the SP&P 500 benchmark, and 74% of the years being positive.

The graph below, using Morningstar data, shows bull and bear markets since the late 20’s all
the way to 2018.

A Bull Market is measured from the lowest close reached after the market has fallen 20% or
more to the next high.

A Bear Market is defined as the index closing at least 20% down from its previous high
close. Its duration is the period from the previous high to the lowest close reached after it
has fallen 20% or more.

A visual history of U.S. bull and bear markets since 1926

Source: First Trust via Morningstar

There are two conclusions that should remain with you:

1. The stock market goes up much more than it goes down (several bull markets have lasted
more than 10 years, at more than 17% average annualized return)

2. When it goes down, it goes down fast and sharply (bear markets have lasted less than 3
years, from -22% to -83%)

A bull market might seem like a steady path up and to the right, but volatility is present in all
market conditions. Red days and moments of doubt are very common, even through bull
markets. From 2009 to 2020, a period of fantastic market returns, you had to go through Brexit,
trade wars and general elections, all prompting pundits of all kinds to predict an imminent
market collapse.

Trying to time the market is a waste of time: Nobody can predict it, and if you are out of the
market, you are missing on the gains that the market is willing to give you over the years.

As pointed out before by Morgan Housel, partner at The Collaborative Fund, stock market
crashes happen all the time. Recognizing how often market crashes happen can give you a
better idea of what you are getting into and the risks you are taking when investing in equities.
Here is the historical frequency of pullbacks identified since 1928:

Market drawdown Historical Frequency

10% Every 11 months

15% Every 24 months

20% Every four years

30% Every decade

40% Every few decades

50% 2-3 times per century

Based on historical data, frequent market sell-offs are the price of admission to the stock
market. They happen often, and in an unpredictable way. But the market eventually resumes its
path up and to the right, inexorably following GDP growth. If you decide to be out of the market,
you are far more likely to be wrong than right, and even more so over long periods of time.

Understanding Risk
When you invest, you are taking not only a market risk but also several specific risks.

Market Risk: An individual stock is subject at least partially to the same volatility as the
market. Think about boats moving up and down with the tide.

Sector Risk: If the entire tech sector takes a beating, like in the early 2000s, even the stocks
of solid companies like Microsoft (MSFT) can go down. Companies from the same sector
tend to move in tandem, as illustrated by the recent pull-back.

Company Risk: The most obvious one. If a company’s business slows down or fails to
deliver on expectation, or even files for bankruptcy.

When you decide to invest in equities, you already have made the decision to embrace market
risk. The best you can do is to recognize it for what it is and let it work its magic both on the
way up and on the way down.

If you are exposed to a specific sector or category such as Enterprise Software, it should not
surprise you to see excellent companies such as CrowdStrike (CRWD), Twilio (TWLO) or Zoom
Video (ZM) fall together in the past few days. Your willingness to see a large part of your
portfolio underperform for an extended time should educate the level of concentration you are
willing to take in a given company or a given sector.
Some perspective
The most powerful way to keep emotions in check in a market sell-off is to take a step back
and look at the bigger picture.

I want to provide readers with a look at my own portfolio drawdown. My real-money portfolio is
highly volatile, mostly because it's heavy in the Technology, Communication and Discretionary
sectors. I have enjoyed a significant market beating performance over the years, with my
portfolio returning +395% since 2015 - even factoring the recent sell-off.

During market sell-offs, my portfolio tends to take a deeper dive, which I'm perfectly fine with
because volatility works both ways, and I'm willing to go through the emotional roller-coaster in
order to achieve an above-average performance. This strategy is not for everyone, and it works
for me only because I'm very patient and invest for the next five, 10, 15, 20 years and beyond. I
identify a market sell-off as an opportunity to buy. If that's not your natural tendency, you are
probably better off investing in index funds automatically and let someone re-balance it for
you.

My real-money portfolio has taken a big hit over the last few days. My investments in
companies like Teladoc (TDOC), Fastly (FSLY) or Zillow (Z) are down more than 30% since mid-
February. Huge winners of the App Economy Portfolio like Shopify (SHOP) or The Trade Desk
(TTD) (both 11-baggers as of this writing) are down more than 25% from their all-time-high.

But instead of focusing on the past week, or even the past month, I like to look at my portfolio
performance over the years to keep things in perspective. As illustrated below, I might be down
significantly over the past week, but it should only be observed in the grand scheme of things.
My own strategy has enabled me to more than quadruple the S&P 500 performance since
2015. How many times has my portfolio dropped 10% in a few days, only to eventually rebound
to new highs? Measuring my own performance and keeping score has helped me stick to my
own strategy.
Source: App Economy Portfolio performance from Personal Capital

It's also interesting to look back at the previous large market drawdowns that occurred in late
2018 or in March 2020, clearly visible on the chart. When I look back at my trades during these
sell-offs, I see multi-bagger returns across the board. This illustrates why sticking to your
strategy during market drawdowns can be extremely lucrative.

Focus on quality businesses that rarely sell-off

Warren Buffett wisely recommends to "Be fearful when others are greedy and greedy when
others are fearful."

I wrote previously about fear and greed and how most investors have it all wrong. Even if you
are buying during a market sell-off, you might be doing it wrong.

Are you investing in quality companies or simply chasing bargains?

Are you buying something because it is "dirt cheap" or seizing the opportunity to accumulate
quality stocks at a lower price?

The main reason you should be looking for quality rather than sheer value in the context of a
market sell-off is that you are already benefiting from a market discount. That discount is
offered usually across all types of investments, making some of the best companies more
affordable.

Market and sector sell-offs are a unique opportunity to finally get a discount on the businesses
that keep hitting new all-time-highs and running away from you. I believe that's where your
focus should be.

Of course, the skeptics will continue to say that the high-growth stocks remain extremely over-
priced by historical standards. They predict that the next shoe is about to drop, even in the face
of a market correction. This mindset has kept many investors away from FAANG stocks
(Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOG)
(NASDAQ:GOOGL)) in the past decade.

Predicting an imminent crash? Isn't this the very symptom of fear?

Building up positions in your winners is a powerful investment philosophy and one that makes
even more sense in the context of a market downturn. I covered the art of adding to your
winners previously when I explained why I was adding to my position in MongoDB (MDB).
Source

These great businesses that sit at the top of your portfolio are the very same as they were
before any sector rotation, and they will still be the same after the storm passes. In the short
term, a stock performance can be detached from the underlying business, both in up and down
markets.

Source: CNBC

Cash deployment strategy

Now, assuming you understand the importance of maintaining an optimistic outlook in the face
of a market sell-off and are ready for some shopping to take advantage of depressed
valuations, we still need to talk about cash deployment strategies.

Maybe you have cash on the sidelines and you are wondering when or how to put it to use.
Many investors make the mistake of going all-in at the first sight of a market pull-back of a few
percentage points, only to feel buyer's remorse when the market continues to fall.
I love this blog post from Morgan Housel covering his cash deployment strategy in the context
of a market drawdown. He shows in this graph how much of his cash set aside for investing he
would deploy in the market based on how much the market has sold off.

Source

Since the S&P 500 is generally used as a proxy for "the market," we still have a long way to go
before we hit even the 10% mark. I tend to look at how much my own portfolio has fallen from
its previous high as an indicator of the opportunity at play. For example, the App Economy
Portfolio is down about 17% from its previous high as of this writing. Using the chart above, it
would indicate that now is a good time to deploy around 32% of the cash available to invest.

Whichever indicator you choose (the S&P, the Nasdaq, your own portfolio draw-down), this is an
interesting way to look at cash deployment that can help your investing strategy and avoid
running out of dry powder too fast.

The Art of Doing Nothing

Because emotions run high after a series of red days, the best course of action is often to sit
on your hands. That's right, doing nothing at all.

As a marketplace leader, I get questions every day about portfolio re-balancing, usually taking
the form of a desire to chase returns. Many investors decide they want to reallocate a large
part of a portfolio based on what seems right to do in the heat of the moment.

The reality is that no portfolio re-balancing should happen in a hurry or be prompted by events
that have nothing to do with your long-term strategy. That's why journaling and writing down
your investing strategy can be so powerful. It can guide you and put you back on track when
you feel compelled to break it all apart.

Recognizing that there is no urgency to act is essential. As I pointed out in many articles, if
your next trade cannot wait for a few days, you are likely making an emotional decision. A great
investment should not depend on perfect timing or finding the exact bottom.

The Grind
We all want to get our accounts to new all-time highs.

We do it by saving and investing.

It's a given that there are setbacks to the market on the way to new highs. Whenever a new sell-
off occurs, we are all back in the grind trying to get our account back to all-time highs.

The truth is that everybody has to go through the grind. You should not rely on an overnight
success, because there is no such thing. Even Warren Buffett's portfolio is down this week.
Think about it.

A sell-off is naturally shaking out the weak hands and the most emotional investors among us.
Make no mistake: The grind and your capacity to go through it all is part of what makes you a
great investor.

Conclusion
Investing in a down market is a unique opportunity to invest for the long term. The key is to
give yourself the best chance to stay cool and make the best decisions:

Understand what bull and bear markets really are.

Evaluate the risks you are taking and why you are taking them.

Identify and recognize your emotions and keep them in check.

If you want to sell or re-balance your portfolio: Ask yourself if your investment thesis has
really changed, or whether you're simply reacting to the news cycle.

If you want to buy: Ask yourself if you are merely chasing a bargain, or if you truly want to
invest in a quality company for the long run.

Prioritize the businesses that rarely offer a discount.

Look at the big picture: Sell-offs are part of the grind, and we'll all come out stronger on the
other side.

How are you holding up in the recent sell-off and market rotation?

Have you been watching your cash deployment with caution?

Are you focusing on the best of breed businesses or chasing bargains?

Let me know in the comments!

Disclosure: I am/we are long AAPL AMZN CRWD FB FSLY GOOG MDB NFLX SHOP TDOC TTD TWLO Z ZM. I wrote this
article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I
have no business relationship with any company whose stock is mentioned in this article.

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Comments (131) Newest

notyouagain Today, 12:39 AM

Comments (1.04K)

I love it when my companies do fine but their stocks underperform.

But the dividends keep coming.

Reply Like

NoobInvestor888 Yesterday, 5:25 PM

Comments (2)

@App Economy Insights First off, GREAT article. So clear and easy to read, along with great
insights.

My username says it all . . .I unfortunately sold all my (tech) positions in March 2020, then bought
back in only in the past 3-6 months. Basically, my portfolio is looking pretty pathetic and VOO has
well outpaced my performance. Last week, I lost $30k of my gains . . .I'm not feeling so hot. Wish I
had read your article before I sold in March.

Anyways, here's where I'd love some insight from you and readers:
-I'm 40 and have $1M cash on the sidelines waiting to invest and am not sure where to start,
especially given the lofty valuations I'm reading about in the paper.
-What's your investment thesis as you mentioned above? I'm wondering how I can develop a
compass for when markets crash etc.
-A lot of people talk about their crazy returns etc. But I'm wondering what % of total assets do
people have invested in the market? Right now, mine is minimal and I need to increase this
because my returns from Real Estate are just getting me nowhere.

Thank you!!

Reply Like (2)

Philip Eric Jones Yesterday, 5:05 PM

Contributor Premium

Comments (17)

Thanks for this article. Very calming reminder of my overall approach, in a time of emotion and
temptation. My portfolio is similar to yours, heavily concentrated in tech growth stocks. I'm a little
puzzled by the small cash amounts in the cash deployment table. Does this assume a stash of
$1000 available to be invested, or what? I'm even more interested in the flip side of that question.
When do you take cash off the table, and how much? In retrospect, when I was pinching myself at
how great my portfolio was doing, that probably should have been a signal to take at least some
cash out for re-investing in a downturn. (I keep at least 3 years worth of cash set aside out of the
market.) I am very bullish right now, so I had no additional cash set aside to take advantage of this
drawdown. How do I decide when to take cash off the table? Which of my precious high-flying
stocks do I sell? And how much do I take off the table? (BTW, my investment in bitcoin is doing
well, so I could sell some of that for cash, but I think bitcoin will do considerably better over the
next few years than the stock market will.)

Reply Like (1)

wigan4 Yesterday, 10:44 AM

Comments (2.19K)

This is one of the best articles I've ever read, I guess mostly because it's almost precisely what I
do. The key though is being able to have that long-term to infinite investing horizon and never
having to worry about sequence of returns risk. But if you're able to have that, beating the market is
easy. Buy great companies, stay balanced by sector but with a slight upward tilt toward volatility by
keeping a beta slightly over 1, and just let your great companies be great year in, year out, cycle in,
cycle out.

With the beta slightly over 1 you'll lose to the market in downturns, just like the author, but beat it in
the upturns. And guess what? In the long run the market always and only goes up. And just like the
author, when you find yourself losing to the market it downturns all you'll do is say 'Yep, my
portfolio is performing exactly as it should be. In the meantime I'll just keep reinvesting at a
discount.'

My only slight difference with the author is I never hold cash. I always want my cash working for
me, and my approach is to buy quality, not value. And quality companies are always quality
companies whether the market is up or down. So I don't wait and I don't have a list of companies to
buy when the market is down. I just have a list of companies I want to buy (although I don't really
have a 'list', I always know). And it's probably the companies I need to buy to keep my sector or
beta balance where I want it, since I already own all the companies in all the sectors I want to own
anyhow.

Great article on how to beat the market the easy way. The only proviso is it really does require the
infinite investing horizon, and faith and understanding in what you're doing. But if you have all
those, it's really not hard.

Reply Like (4)

pdtor Yesterday, 7:09 AM

Comments (1.98K)

Nice post, this was a buying opportunity for those who missed the market.

Reply Like (2)

Et Cetera Yesterday, 5:44 AM

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Comments (2)

Thanks! Can you recommend a few good books on investment strategy (that could help to create
one for oneself). And some on picking stock. Cheers!

Reply Like (1)

App Economy Insights Yesterday, 11:17 AM

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Comments (308)

Author's Reply @Et Cetera Here is a previous article where I discussed books that
impacted my investing journey: seekingalpha.com/...

Reply Like (1)

Skyfall7 Yesterday, 5:29 AM

Premium

Comments (321)

Thankyou interesting. No idea Bear vs Bull so short.

Reply Like (1)

notre 09 Mar. 2021

Comments (119)

Very well written advice. You never can time the market. But diversification will always save you.
It’s your boring stocks that save you when the high flyers are being slaughtered.
And Never use Margin for holding stocks. If your a day trader fine but it’s margin trading that will
wipe you out.

Reply Like (5)

funkoluckman 09 Mar. 2021

Comments (1)

excellent article, I think that what we all know cannot be expressed in a better way, but in the face
of pressure it is sometimes forgotten and that is that if our boat is solid and stable we only have to
wait for the waves to pass.

Reply Like (5)

nap.jerry 09 Mar. 2021

Comments (535)

Good article! But as you grow older those 20 year plans are no longer possible.

Reply Like (8)

ukinus1950 Yesterday, 3:26 PM

Comments (16)

@nap.jerry Good article. But the time frame is also my problem. 10 year plans are also
questionable for me. The only excess cash if have, excluding the 3-year cash/CD set aside
which is will not touch, comes from my dividend stocks. It is therefore both tough to buy
dips and suffer through them.

Reply Like (1)

montagshannon 09 Mar. 2021

Comments (243)

I guess you could say it's "part of" #2 on the, Five Ways to Prepare?
Make sure you have some stops that trip so you DO have cash to invest in downturns.
Important because I think a lot of us are pretty much fully invested right now? Or is it just me?

Reply Like (2)

nap.jerry 09 Mar. 2021

Comments (535)
 @montagshannon I like stops but too often they have been tripped and that stock
recovered the next day plus some. So, will mainly sell off a small portion on a stop with the
express purpose of rebuying at a lower price.

Reply Like (3)

bilaw81 09 Mar. 2021

Comments (7)

@nap.jerry I don't do stop losses, which locks in those losses. Hold on for the rebound.

Reply Like (5)

montagshannon 09 Mar. 2021

Comments (243)

@nap.jerry I've been there, and will be again; it's definitely an "art", trying to get the right
spread, so you protect, but don't cause early sale of your holdings. Some of that problem is
slightly eliminated by being "in the money" ahead of your stop, but still; opportunities lost.

The problem is almost completely solved when you're 15-20% ahead, can set a trailing
stop with enough room to grow.

You still have to watch them though, sometimes you'll want to adjust or cancel; and the
orders expire in what, 90 days.

Reply Like (1)

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Crockmarket 09 Mar. 2021

Comments (769)

Nice article and well written. The markets went from a bull-to-bear-to-bull in record time in all
history last year. I just wonder if that downturn qualifies as a “new age major correction” given the
new age computer algorithm era, or a true bread-and-butter bear market. If a new age correction,
then I’d think we’re most likely due for a major downturn.

Reply Like (1)

Jeff Swan 09 Mar. 2021

Comments (868)

"If you want to buy: Ask yourself if you are merely chasing a bargain, or if you truly want to invest in
a quality company for the long run."

"Prioritize the businesses that rarely offer a discount."

Two great points!

 Reply Like (4)

MerrellOBrian 09 Mar. 2021

Premium

Comments (73)

This is EXACTLY the type of article I call "REAL" and, it's great for first year investors, as well as
those who might have strayed from the foundation. I don't use the word "basics" because of the
negative connotation on something which should be the ZEN of all trading.
We can write down our top ten rules, and we should. We can swear off emotion, which is futile. We
can gain insight from our loses 10x over our gains, and we must. This article is a print and save on
the wall edition. I am so OVER those articles and authors who practice the "dazzle them with your
brilliance and when that doesn't work, baffle them with your bullshit (ridiculous line charts,
statistics and acronyms). DYGMD?
In summary, loved the clean, clear, crisp presentation, like a fine empanada, filled with meat and
yet, simply understood when digested.

Reply Like (11)

16178052 09 Mar. 2021

Comments (166)

Great article. Never sold during crash of 1987 or 2008. That said, at 73, the psychological effects
were much more prevalent last year. Why? Because I was working and had "time to recover" as I
knew the market would and taking 1,3 or 5 years to do so was not a predominent issue. Also, IMO,
last year was not an economic event as much as a medical one. Meat department was not empty
for weeks during previous events. At times i thought my TP was worth more than my portfolio-lol.
While those previous events created fear, Covid created panic!
Point is that your age is an important factor that can affect your outlook during major market
events. Just my take.

Reply Like (10)

thatz obvious 09 Mar. 2021

Comments (21)

@16178052 No one doubts that you can buy a low cost index fund, wait 20 years and you'll
do fine. But as you point out, you reach an age where the long term strategy isn't a
practical strategy. If I had invested the pittance I earned when I was young, and paid no
attention to the markets or world events for a few decades, I'd be in great shape now.

Reply Like (4)

bilaw81 09 Mar. 2021

Comments (7)

@16178052 Right. I've not got that many years to make up losses. But I have most of my
portfolio in solid, long-time dividend paying stocks that pay me to wait for the rebound. I
 leave the growth bit , which I'm building up, to my heirs.

Reply Like (2)

Cuip99 09 Mar. 2021

Comments (5.08K)

The big issue is do not panic. I stay away from the FANG type stocks, perhaps I could make more
money but I would be taking more risk and worry more about it. So I pick and choose, move slowly.
I just made a buy and it has a good dividend. I will watch it and if it hangs in there, then I will
expand my holdings. No rush but it has to have a dividend or cash payment of some sort.

Reply Like (4)

Capital Mills 09 Mar. 2021

Premium Marketplace

Comments (3)

Excellent piece of art!!

Reply Like (2)

App Economy Insights 09 Mar. 2021

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Comments (308)

Author's Reply @Capital Mills You are too kind!

Reply Like

Filling the Gap 09 Mar. 2021

Comments (89)

The permanent-bears always seem to want investors to believe that the worst possible scenario is
just around the corner. To them everyone bought the Nasdaq 100 before the dot-com crash and
either sold at the bottom or waited 15 years to get their money back.

They never mention the fact that there are some great bargains after crashes, and how investors
can use these opportunities for future gains. If you focus on innovation, disruption, and growth
there's always going to be ways to make money in the market. And if you own some stocks that did
crash, that doesn't mean you have to wait around for them to come back. If there's a better
opportunity that comes along, you can always take a loss and move your money elsewhere.

A stock like AMZN, obviously, gave many investors a chance to hit it big after the 2000 crash. But
what about some stocks that had their IPO after the crash. NFLX, GOOG, CRM, and MA are some
that come to mind. After the Financial Crises there were many more. V, AVGO, TSLA, FB, PYPL,
NOW, SQ, SHOP, are just some of the big winners. We all know that drawdowns and crashes
happen, and eventually the bears will have their day. But for those who focus on innovation and
disruption, and are patient and have a disciplined approach, it won't matter. Happy investing to all!
 Reply Like (8)

Doggywag 09 Mar. 2021

Comments (1.68K)

@Filling the Gap Good comments. Most of the stocks I own, you could have bought at any
price and still been a winner. The key to it all is to buy great companies---the best you can
find---and then hold them for years . . . and years . . . across all the cycles and craziness,
while ignoring the naysayers and doomers and scare articles. And, oh yeah, reinvest the
rising dividends all the way!

Reply Like (1)

bilaw81 09 Mar. 2021

Comments (7)

@Filling the Gap I bought stocks after the '87 crash and held on to them since. Huge gains!

Reply Like (3)

Joe4stocks Yesterday, 9:57 AM

Comments (367)

@Filling the Gap

There are only really great bargains after a crash .... IF and only IF ... one has the cash or
good enough credit to buy them.

Reply Like (1)

BazaarTrader 09 Mar. 2021

Comments (20)

Great article. Thanks for sharing your experience and strategy.

Reply Like (1)

David-McCormick 09 Mar. 2021

Comments (538)

Thanks for a timely article. Some folks just sell a few "covered calls" in high beta shares. That
seems to be a low risk way of playing the downside using the existing portfolio. If you have some
"lots" in a portfolio that are "underwater," selling a "covered call" might give one an added tax
deduction, if the call one sold is exercised. Right ? I am not that keen on "timing" the market. When
ask how he made his money in the market, old Bernard Baruch (1870-1965) is quoted as saying: "At
the top, I sold to early and at the bottom, I bought too late." Of course, that may be too easy for
experts. Right?

Reply Like (2)

racerkeith 09 Mar. 2021

Marketplace

Comments (1.11K)

That's the problem with trying to time the markets, you almost always lose. I'll wait until they clean
up the blood from the NASDAQ sell off. In a down market, my money is buying more value stocks
that will have more room to run and pay great dividends

Reply Like (3)

Benitez 09 Mar. 2021

Comments (328)

@racerkeith Until now only insolated "M" and "W" shapes, not resonance, but indicating
volatility. Also, the VIX baseline is still high, which means that we have no consolidation ,
we are in a bumpy terrain, I advice take insurance measures

Reply Like (2)

Robert.from.Ct 09 Mar. 2021

Comments (2.47K)

READERS THOUGHTS WANTED

I am thinking of selling my highest cost basis shares in a IRA for a loss and then buying back the
shares to lower my cost basis at the same time.no wash rule and I lower my cost basis---------any
ideas on this approach?

thanks

Reply Like (1)

dgiinvestor 09 Mar. 2021

Premium

Comments (768)

@Robert.from.Ct Your cost basis is just psychological since you cannot deduct capital
losses from your taxes.

If you sell and rebuy, you may as well just buy a few shares right here and genuinely lower
your cost basis while maximizing how much gain you can have when you eventually sell.

Reply Like (3)

nap.jerry 09 Mar. 2021

Comments (535)
 @Robert.from.Ct Buying back at a lower price is good, more shares. But what makes you
think that loser will be a winner?

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Robert.from.Ct 09 Mar. 2021

Comments (2.47K)

@nap.jerry well,I am talking about solid companies---AMZN,FB,etc

Reply Like (1)

Robert.from.Ct 09 Mar. 2021

Comments (2.47K)

I bought TSLA at 775.00----------thought that was a good price from the 900.00 high-------------bought
to soon-----------hard to judge these things

I am trying to average down on starter positions when they are down at least 10%---------10k--a full
position-------I start with 2.5k---------if that is down 10% or more I add another 2.5k----------down
another 10% then I add another 2.5k------I am then down to my last 2.5k to invest in the stock for it
to be a full position----no more adding----------just hold on know matter what

thoughts and ideas welcome on this approach

Reply Like (2)

dgiinvestor 09 Mar. 2021

Premium

Comments (768)

@Robert.from.Ct It sounds good to me.

I also try to wait at least 2 weeks between repurchases to make sure I don't build out a full
position before I see a true bottom. I also try not to catch a bottom, but wait until I see
some positive momentum to avoid falling knives.

I have burned myself in the past with $WBA and $WRK by not having these additional
personal guidelines.

Reply Like (4)

Tartaro 09 Mar. 2021

Comments (19)

Great article. A very thorough analysis of what you or could do. Agreed, accumulated a few 5G
stocks , some to average down, other for the long term upside potential.

Reply Like (1)

 NoobInvestor888 Yesterday, 5:03 PM

Comments (2)

@Tartaro Which 5G stocks?

Reply Like (1)

tssai98 09 Mar. 2021

Comments (223)

Added Tesla, CMLF, CAPA

Reply Like (1)