Afraid you missed the bottom?
Well, the market has rallied quite hard for the last two weeks. And, many who have been sitting on the sidelines waiting for an all-clear signal might be feeling a bit anxious. Heck, how can you not be worried when stock blogs like Tech Ticker are publishing stories like, “Admit It. You’re worried you missed the bottom.” Or, how about this article at Marketwatch.com analyzing the technical sentiment behind this latest reversal.
It’s anyone guess if there’s another shoe to drop in the current economic crisis. Maybe the storm is finally passing. Or, maybe we’re all just waiting for more bad news. In hind sight, if the last two months was the bottom, you’ll probably kick yourself for not seeing through the media fervor. The markets had corrected into the low 8000s, yet as fear of auto industry bankruptcies took hold, the market once again dropped to new lows in the mid-7000s. You’ll probably kick yourself for not realizing it was all an overreaction and that the market was presenting an opportunity far too cheap to pass up.
Maybe, this is exactly what you’re thinking right now. You might be tempted to chase this current rally, praying that you didn’t miss too much. Or, you might be paralyzed with disappointment over missing a potential bottom. Well, good news. You shouldn’t! Market timing is a difficult thing. For many of us, just being able to guess at the market’s direction is a difficulty compounded with the difficulty of even having available funds to take advantage of such clairvoyance.
In the end, there’s only one market timing trick that will work. Be judicious and buy high value stocks that you’re confident in. And, by confident, I mean stocks you’re confident enough in to continue to average down into. No, you won’t get the absolute bottom, but you will get some damn good deals in a market like this. In fact, the markets haven’t presented us with overall valuations this low since the 1980s (and, if you listen to some the 1930s). Don’t worry about missing the bottom, but now is the time to be judiciously looking to act. Even if there is another leg down, investors who can afford to look 2 or more years down the road stand to come out very, very well.
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