Looking at multitudes of profitable, extraordinary quality companies in the world today, you would learn that: (1) the majority move up and down consistently (if not predictably) with an upward long-term bias, and (2) that there is not much if any similarity in the timing of the movements amid the stocks themselves. This is the "Volatility" that most people worry about and that Wall Street (and especially professional traders) desires you to worry about. Remember, that as individual investors, we are the small fish swimming in a big sea. This volatility can be carefully confined to selected sectors, or much broader, encompassing just about everything. The broader it becomes, the more likely it is to be labelled as a trend, either a rally or a correction. This is the normal condition of things in the stock market, Don't take it for granted as she gets high, and in no way stay away from her when she feels low. Accept her volatile directions, work with them in whatever direction they travel.
Ironically, it is this natural volatility (caused by hundreds of variables human, economic, political, natural, etc.) that is the only real "certainty" in existence in the financial markets. There will always be rallies and corrections. In actuality, it is useful to "go back to the future" to start a realistic Investment Strategy. In the sphere of the previous forty years, there have been no less than ten 20% or greater corrections followed by rallies that brought the market to significantly higher levels. The DJIA peaked at 2700 prior to its historical 40% crash in 1987. But at 1700, it was still 70% beyond the 1000 barrier that it danced around with for decades earlier... Continuously a higher peak, seldom a lower low. The '87 debacle was followed by several somewhat less exciting corrections, but the argument was being made in favor of a more flexible, and realistic, Investment Strategy. Mutual Funds were spawned by a Buy and Hold Mentality.
Call it insight, or hindsight if you desire to be challenging, but a long-term opinion of the Investment Process eliminates the deductive reasoning and points pretty unmistakably in the direction of a trading mentality that keys on the natural volatility of hundreds of Investment Grade Equities. In the course of corrections, consider these straightforward truths: 1) although there are more sellers than buyers, the buyers plan to make money on their purchases, 2) so long as everything is down, don't agonize so much concerning the cost of individual holdings, 3) fast and steep corrections are better than the lingering attrition variety, 4) always accept even half your normal profit target while buying opportunities are abundant, 5) don't be in a hurry to populate your portfolio, but if money dries up sooner than it's over, you are doing it properly.
A volatile market creates opportunities with each gyration, but you have to be willing to transact to reap the profit. A crucial primary step is to recognize that both "up" and "down" markets are forces of nature with abundant promise. The proper stance concerning the latter, will make you much more appreciative of the previous. Most investment strategies require answers to unanswerable questions, in an effort to be in the exact place at the right time. Hesitancy doesn't cut it with the Markets... In or out too soon is not an problem with her. But wasting the opportunities she provides really ticks her off! Lucrative investment strategies require an understanding of the forces of nature, and disciplined rules of portfolio management. If you can transition back to individual securities, you will do better at moving toward your goals, most of the time, because the opportunities are out there... All of the time.
So let's adopt selected new rules for this investment game and understand to live with them for a few cycles: Let's acquire good stocks new and old at lower prices during corrections. Let's take reasonable profits on those that go up in price, on every occasion they are kind enough to do so. Let's examine our performance based on the results of these trading transactions alone and at market cycle examination points for a smiley faced change of pace. And one other thing...
Let's celebrate the Markets, her uncertainty, and her volatility.
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