Dear Member, You are not alone. Many fellow investors were also caught off guard by the quick ons...
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| Dear Member,
You are not alone. Many fellow investors were also caught off guard by the quick onset of this bear market. And thus many of their portfolios are also in disarray.
Unfortunately there is no rewind button. And no time machine.
The best we can do is stare this bear market straight in the face and make the right moves going forward. That is why I came up with this 3 step process to get things on track starting now.
Step 1 = How Much Lower? How Much Longer?
Bear markets come in all shapes and sizes. But on average we see a 34% decline in stock prices and lasts for 13 months.
The problem in assessing the dimensions of this bear is that the shape of the Coronavirus is so unpredictable. Obviously the longer it rages on...the greater the devastation to the economy... the more painful the decline in stock prices.
On the other end of the spectrum there is a ray of hope from China and South Korea that they were able to quickly contain the virus. Thus, there is a thawing of their economies and stock markets that we hope can be replicated here.
The safest and surest answer right now to what happens from here is...NO ONE KNOWS!
Meaning that the CDC doesn't know what will happen. Nor does the Government. Nor does any supposed expert. They are all just guessing at this stage.
This idea of "NO ONE KNOWS" is especially important to keep in mind as we move on to...
Step 2 = Pick an Investment Strategy
So if "no one knows" the path the virus will take, then it is hard to say whether buy the dip or shorting the market is the right call. And given the speed of this market, it is dangerous to lean too far in either direction.
One all-to-common strategy is to play the ostrich with your head in the sand hoping for it to blow over. However, we all know that "hope" is not an effective strategy.
Heading to all cash is another popular choice. And yes, there is no way to lose money with this approach. But there is also no way to make money.
For me, and many other investment professionals, the answer is to go with a hedged portfolio. One that combines the right blend of stocks and inverse ETFs to squeeze out profits as the market heads further south.
For example, the hedged portfolio I constructed for the Reitmeister Total Return newsletter generated a +5.13% profit last week as the S&P 500 tumbled another -14.97%.
Building an effective hedge is easier said than done. But this next section should help you with that...
Step 3 = Select the Right Stocks & ETFs
First, is the selection of the inverse ETFs. So many to chose from. Which industries? Or indices? Or Leveraged?
This is a case of not overthinking it. Just go for the bread and butter choices of the main indices. But in general smaller stocks, like the Russell 2000, will fall more than the larger, safer stocks in the S&P 500.
The much trickier part of this hedge strategy is the selection of the right stocks. That's because the typical hedge will seek the most conservative stocks like consumer staples, utilities and pharmaceuticals that will hold up better than most under the downward pressure of the market.
But there is one serious problem with this strategy. These same stocks will severely underperform once the market bounces from bottom.
The solution is to dig deeper to find the rare few stocks that have defensive attributes in the face of the Coronavirus. Yet still plenty of upside potential when the next bull market is ready to emerge.
What to Do Next?
Hopefully the 3 steps above get you on the right track. However, not everyone is comfortable constructing a hedged portfolio. Especially if it is your first time.
If you would like some help with this, then consider taking a 30 day trial to the Reitmeister Total Return newsletter. This is same newsletter portfolio that gained +5.13% last week as the S&P cratered to new lows. And it continues to gain today.
Once on board then you will see my current portfolio of 5 specifically selected stocks and 3 inverse ETFs. Plus you will receive updated market commentary and new trades to ride the bear to bottom and get prepared for the next bull to emerge. Just click below to get started now:
30 Day Trial to Reitmeister Total Return
Wishing you a world of investment success!,
Steve Reitmeister
...but everyone calls me Reity (pronounced "Righty")
CEO, StockNews
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