US STOCKS ARE GOING DOWN – WHAT SHOULD INVESTORS DO?


THE INTELLIGENT INVESTOR

 

THE US STOCKS HAD A VERY BAD DAY YESTERDAY. ALL MAJOR INDECES LOST MORE THAN 3%. ON TOP WAS THE NASDAQ – THE TECH MARKET – THAT LOST OVER 4%. WHAT ARE THE REASONS, AND WHAT IS  THERE TO DO AS INVESTORS?
THE REASONS WHY THE MARKETS WENT DOWN – AND THEY MIGHT GO DOWN FURTHER TODAY – MAY BE MANIFOLD. AS FINANCE AND ECONOMY ARE NOT EXACT SCIENCE, WE CAN ONLY SPECULATE. THE US-CHINA TRADE WAR, THE REACTION OF THE FEDERAL RESERVE OF THE USA, THESE CAN BE TWO REASONS OUT OF MANY. BOTH TRADE WAR AND INCREASE OF INTEREST RATES HAVE HIGHER PRICES FOR CONSUMERSAND/OR LESS PROFITS FOR COMPANIES AS CONSEQUENCES.
OR IS IT THE FEAR THAT EARNINGS OF LISTED COMPANIES ARE GOING DOWN IN THE NEAR FUTURE?

AS I SAID BEFORE, ABOUT THE INFLUENCE OF ALL EVENTS ON THE DECREASE OF THE STOCK MARKET WE CAN ONLY SPECULATE.IF YOU HEAR TWO ECONOMISTS TALKING ABOUT THAT, YOU WILL SURELY HEAR THREE OPINIONS. THESE ARE YES, NO, AND WHO KNOWS?!

SO LET’S PUT ALL SPECULATIONS ASIDE, AND CONCENTRATE ON THE QUESTION WHAT AN INVESTOR CAN DO TO AVOID SUCH CRASHES. FURTHERMORE, NOT BEING INFLUENCED BY EXTREME UPWARD/DOWNWARD MOVEMENTS OF STOCKS.

AS YOU MAY ALREADY KNOW. I AM A FAN OF THE INVESTMENT STRATEGY OF WARREN BUFFETT. SO, WHAT WOULD WARREN BUFFETT TELL YOU?

HE WOULD SAY THAT YOU SHOULDN’T LISTEN TO MOVEMENTS OF THE STOCK MARKET AT ALL. AND ALL THE DISCUSSIONS ABOUT DIVERSIFICATION OF YOUR PORTFOLIO CAN ONLY DEVIATE FROM THE CORE OF THE PROBLEM. YOU SIMPLY CANNOT LOOK AFTER THE DEVELOPMENT OF 100 OR MORE STOCKS AND THEIR MOVEMENTS WITHOUT GETTING CONFUSED.

ADMITTEDLY, THE CONCEPT OF THE INTELLIGENT INVESTOR IS RATHER TIME-CONSUMING AT THE BEGINNING. FURTHERMORE, IT ASKS YOU TO LOOK AT THE NUMBERS OF THE COMPANIES YOU WANT TO INVEST IN VERY THOROUGHLY. BUT IT IS  WORTH IT. DON’T PUT ALL YOUR EGGS INTO ONE BASKET, BUT CHOOSE ONLY A FEW BASKETS TO PUT THEM IN. IT SHOULDN’T BE MORE THAN TEN STOCKS TO INVEST IN; 5 TO 10 IS IDEAL. YOU CAN DOWNLOAD THE BOOK “THE INTELLIGENT INVESTOR” AT THE BEGINNING OF THIS ARTICLE. READ IT, IT’S WORTH IT.

APART FROM THAT, ONLY INVEST IN COMPANIES IF YOU KNOW SOMETHING ABOUT THEIR MARKET SEGMENT AND THE ENVIRONMENT THEY OPERATE IN. IF YOU DON’T KNOW ANYTHING ABOUT THESE THINGS, TAKE YOUR FINGERS OFF THE COMPANY.

AND A LAST TIP FOR THOSE OF YOU WHO DON’T HAVE ENOUGH TIME OR KNOWLEDGE TO CHECK THE COMPANIES, INVEST IN EXCHANGE TRADED FUNDS (ETF). THESE ARE FUNDS WHICH REPLICATE AN INDEX IN ONE WAY OR ANOTHER. AT THE LONG RUN YOU WOULDN’T MAKE A LOSS – BUT IT IS BORING!

Leave a Reply