Should You Buy This Market?
The stock market rose 225 points yesterday, after falling over 500 points during the week. With all this action, not much really happened one way or the other. No important support levels were broken the downside, no resistance levels breached on the upside. Prices remain range-bound, basically where they've been since November. The only important price breach was October's drop below the 200-day moving average, which fairly quickly turned around.
Do you buy a market like this? Or do you wait for a clearer directional signal of some sort that indicates the probably future direction of stock prices? The answer is yes and no.
The yes part has to do with your total investment allocation. Got no stocks? Then there's no good reason not to take at least a modest position now. After all, nothing tells you that stocks are going to collapse right away, just as nothing tells you they'll jump. Assuming you have other investments - basically a well-diversified allocation overall - why the heck wouldn't you hold at leas some stocks.
The no part comes in if you're already in stocks and are looking to add to your position. Why do that now? Are you betting that the market will break out on the upside? Based on what? If you can't give a clear explanation then your just gambling. Fine with that, if you understand that that's what you're doing. But if you think your "investing," don't kid yourself.
Look, we're in a world right now where there's just so much dickering going on by the Fed, encouraged by a government that's drowning in its fiscal irresponsibility, and so leans on the Fed to prop up anything and everything that monetary policy can possibly prop. Low interest rates an printing money - the two hammers of central banks being swung in varying degrees around the world - interfere so severely with price discovery that anyone who spends too much time trying to figure out whether stocks, bonds, gold or any other asset class are fairly priced based on some fundamental view are likely wasting their time.
Okay, if you're investing some or all of your portfolio for some decades-long time period, and are sure you're not going to touch your money - and that means NOT TOUCHING - you can plunk some of your dollars into stocks, turn off the lights, and take a peek in, let's say, 20 years to see how things are going. Otherwise, you've really got no way to project any trend beyond the short-term, and then only if you've got the expertise.
So spread things out, and that includes stocks. As long as your positions are modest, even if we do get that 10% correction everyone keeps saying is coming, you're not going to the poor house. And if at least some of your other investments are structured to hold steady or - better still - increase in value while stock slide, then you've got nothing to worry about, right?
Diversify. Got it?
Do you buy a market like this? Or do you wait for a clearer directional signal of some sort that indicates the probably future direction of stock prices? The answer is yes and no.
The yes part has to do with your total investment allocation. Got no stocks? Then there's no good reason not to take at least a modest position now. After all, nothing tells you that stocks are going to collapse right away, just as nothing tells you they'll jump. Assuming you have other investments - basically a well-diversified allocation overall - why the heck wouldn't you hold at leas some stocks.
The no part comes in if you're already in stocks and are looking to add to your position. Why do that now? Are you betting that the market will break out on the upside? Based on what? If you can't give a clear explanation then your just gambling. Fine with that, if you understand that that's what you're doing. But if you think your "investing," don't kid yourself.
Look, we're in a world right now where there's just so much dickering going on by the Fed, encouraged by a government that's drowning in its fiscal irresponsibility, and so leans on the Fed to prop up anything and everything that monetary policy can possibly prop. Low interest rates an printing money - the two hammers of central banks being swung in varying degrees around the world - interfere so severely with price discovery that anyone who spends too much time trying to figure out whether stocks, bonds, gold or any other asset class are fairly priced based on some fundamental view are likely wasting their time.
Okay, if you're investing some or all of your portfolio for some decades-long time period, and are sure you're not going to touch your money - and that means NOT TOUCHING - you can plunk some of your dollars into stocks, turn off the lights, and take a peek in, let's say, 20 years to see how things are going. Otherwise, you've really got no way to project any trend beyond the short-term, and then only if you've got the expertise.
So spread things out, and that includes stocks. As long as your positions are modest, even if we do get that 10% correction everyone keeps saying is coming, you're not going to the poor house. And if at least some of your other investments are structured to hold steady or - better still - increase in value while stock slide, then you've got nothing to worry about, right?
Diversify. Got it?
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