Tuesday, June 11, 2019

Why Retail Investors Lose

Retail investors tend to invest most when the market is the highest and then cash out when the market drops. Therefore, they tend to buy high and sell low. It is buying high and selling low that is a losing strategy.

What investors should do is invest when the market is rising from a bear market. You should keep investing, but slowly when the market gets relatively high. There is usually something available at a reasonable price. But be cautious of buying at market tops.

Of course, no one knows when a bear market will be over. I have a tendency to buy before the bottom, but I get stocks at great prices and that is really what counts. Currently, I think that the market is relatively high, so I have not been investing much. When the next bear comes, I will just wait it out until stocks seem relatively low and then buy something.

Once a bear market starts, it is foolish to sell. This is how you lose. I know that bear markets can be scary, but this is how the stock market works. In the last two bear markets my portfolio went down 30%, but recovered within 2 years each time.

In a bear market, do not focus on the value of your stocks because they can be wildly out of line with how well your companies are doing. Focus on what your companies are actually doing. Focus on whether or not they can survive the bear market and following recession. Focus on their ability to pay your dividends.

I have found that each bear market is different and it affects different sectors of the market in different ways. You will have stocks that cut or suspend dividends. It will happen. You can do all the due diligence in investing your stock, but some stock will have problems that were unforeseen. It happens. It is not necessarily a time to sell these companies, but you have to look at their ability to survive and not be irreparable damaged by the recession.

In a bear market also, some companies will keep their dividends flat and yet others will raise theirs. It generally depends what sector they are in. To survive a bear market, you might want to reframe it into an adventure in investing. It can go from scary to exciting.

On my other blog I wrote yesterday about Goeasy Ltd (TSX-GSY, OTC-EHMEF) ... learn more. Next, I will write about Lassonde Industries (TSX-LAS.A, OTC-LSDAF) ... learn more on Wednesday, June 12, 2019 around 5 pm.

This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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