The bull Market is still struggling! But remember this before buying stocks
With stocks continuing under pressure, following Donald Trump’s unceasing war tweets no seems a good time to head out and pick the bottom, hold Nvidia NVDA - Get Report and Micron MU - Get Report as they stay off their record highs, all these are expected, but will make sure to keep this in mind.
What are you? A simple active trader or disciplined long term investor? You better be the latter, that is, the disclaimed long term trader. Because whereas there is really nothing wrong with going out right now to make some quick buck every trading minute sessions, volatile markets such as this require even the active trader that you are to master some discipline and study stock charts.
So here are some investing tips from Tony Scherrer, the director of research Smead Capital Management's given in his last client note.
Number one, be Contrarian
Meritorious investing is not about seeking comfort, particular during extremes, Scherrer maintains. According to him, times like this when it is certain for the world to ‘treat you as a one-eyed monster should you see otherwise, are the easiest for someone to cozy up with overbought consensus. “This,” Scherrer warns, “is not a popularity contest."Secondly, Stock Valuations as a matter of rule, Matter
It is important that before you head out gung-ho to buy on the bottoms, that you first do some homework on company valuations, particularly in markets such as these.
That valuation matters dearly, Scherrer said, is a saying that offers a lot of efficacy when it comes to investing.
Giving the example of the likelihood that 71% of the time for example, the MSCI World Value Index has always outperformed the MSCI World in 5-year periods rolling from say January 1975 and through April 2018, the “current rear-view mirror”, he observed, “is very misleading compared to what has normally worked in investing over time."Shopping Meetings Investing
In this market, you better look for the sales in the same manner in which you go out shopping new clothes.
Last but not least, Scherrer advices: "Buy stocks the same way you buy a new suit or dress. If it's on sale, you're more compelled to want to own it."
According to him, this may sound basic, however in a world of $1,000+ stock prices all of which have lately done well, It is important that you bear in mind that this does not make them more attractive for new money, but instead makes them less. On the contrary, Scherrer concludes, where high quality securities are concerned, prices dropping makes ownership of them more attractive.
Disclaimer: I am not any kind of financial adviser, and i do not work/write for any organization/company. These are only my thoughts compiled following my own research. You can share your own in the comments!
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These are some good advices. At the near-end of a bull market like this, it is extremely hard to find good value. Many stocks have an extremely high valuation (look at the FANG stocks). It is therefore much more important to find stocks that are not overprices. If you buy these overvalued stocks you are definetely going to hurt when the bear comes around. I've heard people say that we are getting into the year-year and a half of this extended bull market and I think this may be right. What do you think?
BTW, I'm also blogging about stocks and stock investing if you want to check my blog out.
Thanks for your thoughts @nordal. Let me get back to you in detail later, just wanted to quickly reply.