This Content Is Only For Subscribers
If you are an individual investor where new or experienced and you want to make money and perform well investing in common stocks, there are just three key steps you must learn and follow.
You have to develop buying selection rules that let you pick the best stocks and use charts to determine the right time to buy.
You must have a set of selling rules that tell you when to sell and nail down a profit or cut short a loss to avoid a possible larger loss.
You need a specific method to tell you when the general market averages are topping and headed down and when they have finally hit bottom and turned into a new uptrend. That is all you need.
The general market is represented by leading market indices like the S&P 500, Down Jones Industries and the Nasdaq Composite. The reason you need to carefully evaluate these indices is that when they top then turn down and go into a significant decline, three out of four stocks will follow the markets’ trend and also decline in price.
Many growth stocks, lower quality companies in an industry an even certain high tech stocks can drop two to three times as much as the market averages. And worse still, some of them might not come back up or could take years to do so. So if a bear market declines 20% to 25%, some of your stocks drop 40% to 75% from their peak price.
It usually takes investors at least three or four years to lean this lesson the hard way. So you have to learn to both buy stocks at the right time and to sell them at the right time.
When US is in real trouble you tend to get corrections of 30% to 50% in the Dow Industrials. That happened in 1937, 1966,
When basic conditions in America are not a bad, like in 1948-1949, you get smaller market declines of around 17% to 27% off the peak.
Strangely, many of these declines end in the fourth quarter of the year. Bear markets are normal and necessary and serve to clean up prior excesses. They also allow the market that in time, allays follows. So never let yourself get discourage or lose you’re confined, otherwise you will miss the next bull market.
