We just might be in a correction. The market has been trying to rise but there is just no pep in the market like the tail end of 2013. Stellar risers like Tesla have failed to make another jump up and stars like facebook have rolled over a plummeted. All the signs are in place for another summer slump.
You can look at a summer slump as a bad thing you wish wouldn’t happen, but look again.
A slump or a crash are just great chances to jump in and load up on cheap stocks.
So what to do if the market dumps this summer.
1 Be greedy.
Buying at the bottom and selling at the top is the only way to do well in the markets. A slump is just such an opportunity to get in low. As such you should be using all your firepower after the market has tanked because that’s when the bargains are there to be had. No one will agree of course, it will be the end of the world according to many. The doomsters will finally be saying how right they were and the next leg down is just around the corner. Don’t believe it for a minute. The worse it seems the better time it is to buy. Unless there is a 10km comer on its way, the correction or even the CRASH, will be a blip.
2 Wait
OK so the market is tanking. Buy?? Nope, wait. A good correction is not over and done in a week, it can take a month or two. A crash can take 6 months to bottom out. With so much wound licking to go on there is no rush to bail in. Take a long look and wait. You never know there might be another leg down. As such pick up great bargins but don’t be in a rush. Things aren’t going to stop being bad for a few weeks, there is a lot of time to buy the choicest bargains.
3 Buy your favourites.
You should have a portfolio and it will no doubt have taken a smack. The first stop is to buy some more of your favourite companies. The old method of buying the dips still applied. As long as buying the old favourites doesn’t undiversify you, now is the moment to get more.
4 Re-examines old favourites.
We all have stocks we bought and made a ton out of, then forgot. Go back over your old winners and see where they are. They might not be so hot anymore. Agood correction can have the momentum heard running in panic. That sotck you sold high might now be low. You cant watch all the stocks all the time, so go back to the ones that did you good and see if they are rwady to be bought again.
5 Hunker in for the ride.
The temptation is to trade a slump but don’t get suckered in. An initial bounce can give you quick profits but don’t be on a hair trigger. Hang on in there and wait for the long risev to come. Let those nice 20% profits run, they could go a lot further because the end of a sharp correction is often the beginning of a long bull. Stocks that got a reset in a slump can run and run as the momentum crowd crawl back into the market and jump on the next ex-bargain and try and ride it to the moon. Stick around for the ride.
The market does feel toppy but a few weeks of panics can reset all that. If it comes embrace the trough and use it to build your portfolio. The market is high risk but there is no risk that the future won’t hold slumps and rallies. The key is to buy in near the bottom of the cycle and only hold your best stocks at the top.
Very soon we are likely to have plenty of buying opportunities coming or way.