When the Sky Is Falling Should You Invest?

The good news: The market is offering bargain-basement sale prices on many stocks.

The bad news: Prices got that way from falling these last several months.

Should you invest in falling stocks or not?

Fast-falling share prices didn’t prevent legendary investor Warren Buffett from taking big stakes in Goldman Sachs and GE. And Buffett is a cautious investor who loves undervalued companies with a penchant for generating consistent profits year after year.

But it’s risky investing in falling stocks unless you have a very good idea of what you’re getting into. With a portfolio loaded with financial and industrial companies, Buffett was treading on very familiar ground with his latest investments. And don’t think that he wasn’t aware that these companies were also leaders in their respective sectors. He invested in the cream of the crop.

In a falling market, you have to be extra careful. Cheap value isn’t always good value. Invest in companies with outstanding track records of growing profits and leading their industry. And don’t stray outside your expertise and experience. By doing these things, you can greatly reduce risk and end up with some great stocks in your portfolio.

[Ed. Note: The economy may look bleak right now. But you still have opportunities to prosper – if you look in the right places. ETR Investment Director Andrew Gordon has pinpointed a method – which has been accurate 92% of the time – that you can use to make money on stocks as they fall. It all begins with a “red flag announcement.”]