With the sharp market falls, triggered by conoravirus, we must ask what now? Do we wait for more falls? Do we try to profit from falls? How? Do we work on the basis of the long-term and that all will be fine in the longer term. Or do we say even in the short term it will all be fine. Let’s look at the arguments for each.
In the short term it will be fine
The support for this argument is that when the major US markets fall steeply on a Monday, as they did this week, then within a week of that they are almost always higher – sometimes by as much as 10% in a week. Of course, buying when people are fearful is not something that would come naturally to most people. By the time you read this, if the market has rebounded, I will add to my US index trackers. I use what are called triple leverage Dow ETFs using HL.co.uk as my broker. So if the Dow goes up 10%, I would be up 30%. Actually, these can be risky. So always take proper advice.
Wait for More Falls
This tactic I have adopted. But I’ve done it like this. First, I picked stocks I like for the very long term, like Amazon. I then sold some last week because I had accumulated large profits. Next, I told the broker to buy some ETP Note 2x Amazon ie double leverage Amazon tracking stock. But, I told the broker only to buy if there is a 20% drop. That way, I should make roughly a 50% return because they’re 2 x leverage, once Amazon gets back to it’s peak after the decline – and that should happen in a year.
Complicated? I use a method of education to drip educate people in bitesize. I use a free app to do this. You can receive the education and information on your desktop or phone – free: https://t.me/pipspredator
Ignore It
There is a good argument for ignoring the falls. The argument is that in the long term it all works out and you should not try to time good companies, instead just own them.
Profit from Falls
Now there are two ways to do this. First, trading. You could ‘short’ ie sell say the Dow and buy it back later cheaper. We do this, but it needs a but of skill, and also is higher risk in pursuit of higher return. Second, there are index trackers which go up as the index eg FTSE falls. You could use one of these.
Each of these strategies differs in complexity. The more complex, the more potential risk and reward. Always understand fully what you are doing. Here I presented just an overview.
Alpesh Patel
