Wednesday, January 30, 2019

Market Outlook: Strategies To Conquer A Bear Market

A bear market can be your worst enemy or your best friend.
There are three approaches that you can employ to potentially capture enormous profit in this down market.
Which strategies you should take is strongly dependent on your own financial situation and temperament.
For indeed, the investor’s chief problem – and even his worst enemy – is likely to be himself. - Benjamin Graham
Most investors are highly enthusiastic when their stocks appreciate: nearly all investors can relate to that “warm feeling” when their portfolio lit up green during a bull market. Nevertheless, one has to conquer the bears in the middle a downturn in order to capture the profits of the subsequent bull market. In the thick of the recent downturn, the highly powerful human emotion that is fear exerts its detrimental effects. As investors do not easily forget the pain associated with blood spilling on Wall Street, fear usually induces investors to make impulsive decisions. That being said, we’d like to introduce the new Market Outlook series to help you navigate this time of uncertainty and high volatility.
As shown in Figure 1, all major market indices - NASDAQ Biotechnology Index (NASDAQ:NBI), SPDR S&P Biotech (NYSE:XBI), and Dow Jones Industrial Average (NYSE:DJI) - are trading on a downtrend. Back in 2018, we forecasted that the bear market will grow stronger in 2019. Interestingly, the bears came out of the woodwork after a brief rally in January this year. Except for a few trend breakers, most of the bioscience equities gave up a significant percentage of their recent gains. In our view, it’s quite likely that an overall negative sentiment has recently seized the market.
Figure 1: Macromarket analytics (Source: Yahoo finance)
Amid the aforesaid pessimism, there are three strategies for investors to leverage. First, you sell all your shares now to repurchase later at a potentially lower valuation. Second, you continue to hold your stocks as part of the passive investment approach. Third, you concurrently keep your shares while purchasing additional stakes in your favorite equities. Whether you make big bucks on any one of the three approaches depend on your own temperament, situation, level of research, and a bit of luck. Yes, we said it, luck! Regardless of whether you admit it, there is an element of luck when it comes to investing.

... the complete article is available at Integrated BioSci Investing


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