The US stock market has been taking two steps forward and one step back for several years now. That is a recipe for a long Bull Market, just like the one we have enjoyed since 2009. Having strong returns over several cycles requires not having big drawdowns. That’s why now might be a good time to consider the risks, as opposed to being too aggressive.
While I continue to participate in this market, I have shared several warnings over the last few months that the last 5% of a bull market is the hardest. I have continued to buy the dips and trim over-bought portfolio holdings. Right now, I am seeing several of the highest rated Magnet® stocks look tired. This a signal for me to focus on risks – and I suggest you do so as well.
Making the Most of a Tricky Market
A “drawdown” is a nice word on Wall Street for a loss. Small losses are acceptable and part of investing. Anyone that tells you they make money every month is either lying or supernatural. Over the last several months we have enjoyed great results with our clients, but these results have come with a lot of effort. It really does feel like it is getting harder right now. That’s OK though – that is how markets work.
I am emphasizing now more than ever – avoid bad market behavior. That means, do not average down on losing positions, do not chase winning stocks, and do not buy “story stocks.” Use stop losses and focus on not losing big on any idea. I will remain focused on the few companies that provide the right combination – top Magnet® stocks that continue to work for me. By focusing on my best ideas, and then playing very strong defense- I can stay the course and tune out the noise. I am already looking forward to adding to my best positions when the time is right and I feel less risk out there.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer