Wednesday, February 7, 2018

When should we return to the market

I was asked when should we come back from WSB yesterday. Here it is:

In my book such as "Profit from the coming crash", the market timing has exit and reentry points based on technical. One uses charts and the other one does not.For a ballpark number, it COULD be 45% loss from the peak.

The above is assuming we've a market crash. For corrections, it could be 15% (10% average but adjusted due to the recent huge gain) loss from the peak.

The trillion-dollar question is: Is it a crash or a fierce correction? Many factors have been described in the book. However, corrections are harder to detect. A book is just a book. It is based on historical data (2 last market crashes for me) and every market is different. If you're very conservative like me, you should take actions. I've been too conservative having a lot on CDs for a while and missed some of the recent gain. Again, depends on your risk tolerance.

For conservative investors, use 40% for crashes and 12% for corrections (or even lower so you do not miss the boat at the risk of coming too early). If you feel the crash will last for a year, buy some CDs that mature in 1 year - better than your broker's account collecting virtually no interest.

You are responsible for your actions, NOT me.

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