Is the market correction over?
With the holiday season over and tax season on the horizon, lots of seniors are turning their attention to their finances and wondering what is next in the world of investments.
The markets of the last half of last year were unpredictably volatile and December was the worst year end month since the Great Depression. So it’s no surprise that folks are scratching their heads and trying to figure out what’s next. The year started out as wildly as last year finished, but as I write this on Jan. 9, things seem to be settling into a less manic mood. But don’t be surprised if Mr. Market makes a liar of me before you get a chance to read this.
If the worst of the crazy ups and downs are indeed over, now is the time for brave investors to dip their toes in the ocean of equity investments. Please note that I said dip your toes in, not dive in head first since the water could be shallow and your head might hurt afterwards. Although the markets offers a pretty good chance to pick up some quick gains, you need to be cautious in case more pain is on the way. In my opinion, there are many, many stocks available at bargain basement prices. If a stock has dropped 30 per cent, but has done nothing to deserve the drop such as bad news or a poor earnings result, chances are it will revisit those highs and more in the future. While a general trend down in the market can drive such stocks further down, eventually the big money boys will dive in and start buying with both hands. The secret for small investors is to start small and build position slowly as opportunities arise.
The small investors need to do a little research before they buy a particular stock, but most of the information you need is free and available on the internet. Very large companies that normally don’t make large moves are good ones to take a close look at. Sometimes a great opportunity comes from a stock that suddenly has a spike in volume. If nothing bad is happening with the stock, the increased volume means buyers are returning and the price is very likely to go up. Of course my suggestions are meant for someone who has at least a little education on how the markets work - this is not for beginners. However, those new to this can spend a modest amount of time and money on line and get all the skills they need to get involved. One only needs to start with little positions and learn from experience what works and what doesn’t. As always, I recommend you arm yourself with solid information and education when trading stocks. Many a fortune has been built using strategies like this, so why not you?
Dorian Shortt CFP has over 23 years of experience as a financial planner with a special interest in retirement and estate planning [email protected]