What On Earth Is Going On In The Market?
You know it’s absolutely crazy. Every time you think you understand the stock market, something comes up that makes you wonder whether there is any sanity in it at all.
I mean, just take a look at the way the DOW has been behaving of late. One would be forgiven for assuming that the market has been taken hostage by a bunch of aliens, aiming to wreak havoc on our investments!
It would seem that no sooner does the DOW Jones recover from a bad day’s trading it swings back into a disastrous trading the following day. And these wild swings appear to have spread to other major indices as well.
Exactly what is one to do under such circumstances and how do you protect your investments from being completely wiped out?
Well there appear to be two schools of thought as far as this is concerned and depending on your risk appetite you can determine which way to go.
The first school of thought is, move with the market, whichever way it goes. In other words, buy when the market is generally moving up and sell when the market is generally moving down
In this case short selling of stocks would be the route advocated by this school of thought. This is good advice if you actually know how to do so and have the expertise to come out ahead.
It is however a disastrous route to go, if you have no experience in this process, as it could quite easily result in complete loss of investment.
The second school of thought suggests that if the market is this choppy and undecided, then this is the time to move into cash and stay there. In other words if you imagine the market as a bad storm, you need to take cover until the storm is over and calmer weather returns.
Frankly, rather than try and be a hero, I think the second school of thought is far more appealing and sensible for the average investor. I would rather not make any huge returns, but have my capital investment safe, than put it to risk and which it gets wiped out on investment methods that I do not fully understand how to execute.
You know it’s absolutely crazy. Every time you think you understand the stock market, something comes up that makes you wonder whether there is any sanity in it at all.
I mean, just take a look at the way the DOW has been behaving of late. One would be forgiven for assuming that the market has been taken hostage by a bunch of aliens, aiming to wreak havoc on our investments!
It would seem that no sooner does the DOW Jones recover from a bad day’s trading it swings back into a disastrous trading the following day. And these wild swings appear to have spread to other major indices as well.
Exactly what is one to do under such circumstances and how do you protect your investments from being completely wiped out?
Well there appear to be two schools of thought as far as this is concerned and depending on your risk appetite you can determine which way to go.
The first school of thought is, move with the market, whichever way it goes. In other words, buy when the market is generally moving up and sell when the market is generally moving down
In this case short selling of stocks would be the route advocated by this school of thought. This is good advice if you actually know how to do so and have the expertise to come out ahead.
It is however a disastrous route to go, if you have no experience in this process, as it could quite easily result in complete loss of investment.
The second school of thought suggests that if the market is this choppy and undecided, then this is the time to move into cash and stay there. In other words if you imagine the market as a bad storm, you need to take cover until the storm is over and calmer weather returns.
Frankly, rather than try and be a hero, I think the second school of thought is far more appealing and sensible for the average investor. I would rather not make any huge returns, but have my capital investment safe, than put it to risk and which it gets wiped out on investment methods that I do not fully understand how to execute.
posted by zzzzzzzzzzz at
8:22 PM
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