I’ve never seen the market so ruthless and so volatile at the same time. Wall Street is pouncing on weaknesses in sectors and companies. And because of the huge swings the market is making on a daily basis, when it attacks it really ATTACKS. Companies that had been fairly stable are going down 5-10 percent in one day… 30-50 percent in one week.
Some investors like to swim in calm water but hate to swim when it gets choppy. Is that you? Then get out of the market. No need to put yourself through this if it’s ruining your sleep. But there are things you can do to protect your individual stock investments against all this white water.
• Independent due diligence. There’s more reason than ever for companies to hide the truth from you these days – because with the market falling on its face, the truth isn’t pretty. Instead of talking about dropping demand and lowering prices, companies talk about new and exciting products… or maybe upgrades they’ve made to their equipment… anything to distract you from the grim reality they’re facing. Rely only on your own research and the research of people/experts you’ve grown to trust.
• Periodic reviews. You need to review your portfolio not every spring… or every quarter… but every month. Are you invested in “dead-man-walking” sectors like the auto industry? Restaurants? Retailers (except Wal-Mart)? Even Google has lost its luster. Things are changing from month to month… not year to year. You have to adjust.
• Look before you buy. In the past, when you went into your portfolio to buy more of a company, you probably did so because its shares were rising. But if you want to buy more of a company now, you have to review its latest developments first. For example, most solar stocks had great quarters last go-around. This time, it promises to be a lot tougher. Again, markets are changing fast.
It all adds up to more work for you. That’s the price you pay for being in the stock market these days. Set aside one evening every month to review your portfolio. And pour yourself a glass of wine before you sit down. You may need it.[Ed. Note: The corporate world is having a tough time, but you can still make money if you pay attention to the “red flags” – signals that can predict (with as much as 92 percent certainty) when a company’s stock is going to tank. Know that, and you could make a bundle.]