Wall Street ignoring the economic pain on Main Street

Are you mystified that the S&P 500 is only down 13% from its February high and the NASDAQ is slightly positive year to date? You would think that all the bad economic numbers would dampen investor’s confidence in owning stocks. However, publicly trading companies on Wall Street have a number of advantages over Main Street.

  1. When it comes to government bailouts and subsidies, large public companies seem to be first in line. There are always claims that help is needed to save jobs or what they produce is an essential product or service. However, many of these companies used their cash to buy back stock and pay big executive bonuses instead of saving for a rainy day. (Airline industry)
  2. The Federal Reserve’s zero interest rate policy helps large public companies to sell bonds at low rates to stay afloat, a huge advantage over small and medium sized privately owned companies.
  3. The Federal Reserve has the bond and stock market’s back.  They are adding liquidity to the bond market by buying corporate debt and even buying high yield or junk bonds to keep interest rates low. This allows even the worst run companies to avoid bankruptcy.

Why I think that Wall Street shouldn’t be so optimistic regarding an economic recovery:

I agree with comments made by Fed Chair Jerome Powell who cautioned of a potential credit crunch as stimulus dollars start to dry up. The result would be the loss of thousands of small and medium sized businesses across the country. Owners of many bars, restaurants, gyms and clothing stores have stated that they are fearful of being able to cover their operating costs while limiting the number of customers allowed into their premises.

So far, 32 publicly traded companies have already filed for bankruptcy protection under chapter 11 which leaves many of their employees, suppliers and shareholders high and dry. The economic pain from Covid 19 could be long lasting as more companies file for bankruptcy protection. The recovery may take some time to gather momentum as some jobs will never come back.

It is hard to comprehend that Wall Street is dismissing the fact that all the jobs that were created over the past ten years have disappeared in just under three months. . The weekly jobless claims will continue to be momentous and don’t included workers who want a full time job but are working part time. It also doesn’t include many Americans who are out of work and don’t qualify for unemployment insurance.

I wonder, is it even possible to get people back to work without safely opening up schools and daycares? France reopened their schools last week and 70 new cases of Covid 19 were found in seven schools forcing them to close them again. A new concern for parents is an outbreak of a inflammatory syndrome in children that is linked to Covid 19. Cases of Inflammatory syndrome  have been diagnosed in 27 states in the United States.

Doctors have warned that many U.S. states have reopened without meeting CDC guidelines. The number of positive cases have spiked already in 14 states over the past few weeks. A rising death toll in the U.S. hasn’t stop many Americans from avoiding large social gatherings, ignoring social distancing guidelines and refusing to wearing a mask. There is a high probability that another spike in cases and deaths will dampen consumer spending.

Lastly baby boomers, (60 to 75 years old) have the most disposable income and also face the highest risk of dying from Covid 19. As a baby boomer, I will be avoiding the all travel and leisure activities.

  • Air travel
  • Cruising
  • Resorts and hotels
  • Movie theatres
  • Sit down restaurants
  • Casinos
  • Theme parks
  • Sporting events
  • Concerts

I will avoid anywhere there is large gathering or requires close personal contact.  I am not going to risk my life to get a haircut or go to my local pub to watch a sporting event. It is just a matter of time when Wall Street profits will be affected by lack of consumer spending.

 

Should Trump should be charged with involuntary manslaughter?

If I was a U.S. prosecutor, I would charge Trump with involuntary manslaughter. In case you don’t know what that is; charges of involuntary manslaughter is defined as an unintentional killing that results either from negligence or recklessness. An example is a motorist driving under the influence of alcohol or drugs resulting in a deadly car crash killing another individual.

Trump realized that if the body count from COVID-19 in the U.S. reached pandemic levels during 2020, his re-election bid could be in serious jeopardy. On Jan 21, the first American was diagnosed with the virus. A day later in Davos, Trump was asked if he was worried about a global pandemic.

“No, not at all” he stated. “And we have it totally under control. It’s one person coming in from China, and we have it under control.

On Jan 30 during a campaign rally in Michigan, Trump provided an update on the spread of the virus in the U.S. to a rowdy crowd of supporters.

“We have it very well under control. We have very little problem in this country at this moment with 5 and those people are all recuperating successfully.”

On Feb 2, Trump bragged about his China travel ban on Fox News. He told Sean Hannity and a national audience that:

“We pretty much shut it down coming from China.”

Trump wasn’t quite ready to give up on his number strategy throughout February as he continued to claim the situation was improving. There are plenty examples of Trump being irresponsible. Here are just a few:

  • On Feb 26, he said “We are going down, not up. We’re going very substantially down, not up.”
  • On Feb 27, he bragged: It’s going to disappear one day, it’s like a miracle, it will disappear.”
  •  On Feb 29, he said a vaccine would be available “very quickly and very rapidly” He praised his administration’s actions as “the most aggressive taken by any county.”

The case for Trump’s negligence is the mishandling of the test kits that were sent to laboratories around the country that had a technical flaw and didn’t work. Trump and his team weren’t worried and ordered the CDC to find a work around. The Trump administration also didn’t turn to the World Health Organization for its perfectly functioning test, nor did it remove regulations that prevented hospitals and labs from developing their own tests. Why? Trump remained intent on keeping the U.S. body count low.

Despite mishandling the production of test kits, Trump continues to make dangerous false statements.

On Mar 6 Trump said “Anybody that wants a test can get a test.” 

I could go on and on but this sums things up:

The mishandling of this crisis is reflected in the raising death count that was in the hundreds and now over a thousand. Why hasn’t he used the Defense Production Act to force companies to produce masks, protective equipment and ventilators which are in short supplies? Does Trump even care how many Americans are going to die?  He just wants businesses to re-open in time for Easter hoping that a strong economy and raising stock prices will get him re-elected. He should resign!!!

All state and local governments should ignore Trump’s call to re-open businesses! If not, then what is happening in Italy is only a few weeks away from happening in America.

 

 

Why interest rate cuts won’t save the economy or the stock market

This week, after an emergency call with central bank leaders around the world, the Federal Reserve cut interest rates. A somewhat surprising move coming about two weeks before its next scheduled meeting. It was the first emergency rate cut by the Fed since the financial crisis in 2008 and a strong signal that the central bank is taking the threat of the virus seriously.

The problem is that cutting interest rates, which were already very low, isn’t likely to do much to solve the kinds of economic problems posed by a pandemic.

Think of it like this: if more people get sick, more people can’t work. Businesses become less productive and ailing workers without paid sick leave don’t earn money. (They might also go to work sick.) Meanwhile, others who are either sick or afraid of catching the virus stop going out and spending money.

Restaurants, movie theaters, hotels and airlines have already experienced less revenue. More workers will lose their jobs temporary, so fewer people will have money to spend. Its classic cause of an economic downturn since the U.S. economy depends on consumers’ spending money.

Crucially, all the people out of work will still need money for food and housing costs. The new record-low mortgage rates aren’t going to solve that immediate problem, especially not for renters. Nearly 4 in 10 adults would have trouble handling a $400 emergency expense, according to a recent study from the Federal Reserve.

An economic downturn is coming, the problem is no one knows how severe it will be and how long will it last. China’s economy took a big hit and government took some draconian measures that can’t be done here in North America.

Some precautionary financial steps

  1. Top up your emergency fund
  2. Living pay check to paycheck: then get a line of credit or increase the limits on your credit cards
  3. Start looking for day care services in case of school closures
  4. Don’t put any new money into the stock market until the coronavirus is contained. (Too early to buy the dips, however make an investment shopping list)
  5. Get ready to refinance your debt, but keep in mind that there could be more rate cuts.

Why you shouldn’t panic over a decline in stock market prices

The chart below illustrate what happen to stock market values during the financial crisis. (Jan 2008 until Mar 2011) The left side of the graph shows the market hit bottom in Mar of 2009 and recovered most of it losses by Mar of 2011. I not suggesting that this current market downturn will get that bad.

Keep in mind that the stock market has gone straight up since the market hit bottom back in march of 2009 with a few little blips. The chart below illustrates that the current downturn could be just another blip. This virus will only have a temporary effect on the economy and consumer spending will recover. People will travel again, visit theme parks, eat out and business will be profitable again.

Back in September, I wrote a post to reduce some of your risk and move some money into dividend paying stocks. I hope that you followed my advice.  Dividend income should help to offset some of the fall in value of your portfolio.

 

 

 

Some recommendations for new investors with not allot of capital

 

 

One Size Doesn’t Fit All

 

It has been a long time since one of my readers posed a question that could be answered in a blog post.

Do you have any recommendations for new investors with not allot of capital to start with? $5000 – $10000. Just wondering if there are any things you wish you knew when you started or good resources you would recommend for learning some important basics. Maybe even specific to Canada, allot of the books I have been reading are by American authors.

Before choosing what to invest in, you have to think about your time frame. Is this money going to be tied up short term (1 to 5 years) or long term?  Next you have to decide on a savings goal. For example; are you saving to get married, buying a home or saving for retirement. Finally, you have measure your risk tolerance.

Some short term investment ideas

Low risk investments are usually recommend for a short term saving goals. You don’t want to risk having less money then what you started with. Unfortunately, low risk means low returns. I personally like Exchange Traded Funds (ETFs) because the management fees are lower than mutual funds and they still offer the safely of diversification. Since this blog request came from a Canadian, I will use examples from a list of BMO’s Exchange Traded Funds

  • Low risk – BMO (ZGB) Government bond ETFs – offers 2.5 return
  • Medium risk – BMO (ZLC) Long Corporate bond – offers 4% return
  • Medium risk – BMO (ZWC) Canadian Dividend covered call – offers 6.9% return
  • High risk – BMO (ZJK) Corporate high yield bond ETFs – 7.25 % return

Some Long term investment ideas

  • Low risk – BMO (ZBAL) Balance ETF – 61% equities, 39% bonds
  • Medium risk – BMO (ZGRO) Growth – 81% equities, 19% bonds
  • High Risk – BMO (ZNQ) Nasdaq 100 – 100% U.S. equities

When it comes to investing, Canadians have some flexible options. One of the best options is opening a Tax Free Savings Account (TFSA) with a discount broker; very low trading commissions and no tax payable on income or capital gains. It can be used for both short term and long term savings goals.

Another option for people who are in a high tax bracket is a retirement account as long as you take the tax refund and reinvest it. For example: Someone in the 35% tax bracket would get a refund of $3,500 with a $10,000 contribution into a retirement account. (RRSP- Registered Retirement Savings Plan for Canadians)

For small investors, I highly recommend using a Dividend Reinvesting Plan (DRIP). Most EFTs offer the ability to reinvest the income into additional shares with no trading costs. DRIPs use a technique called dollar cost averaging which allows the investor to buy stock as it moves up and down. A great way to compound your returns.

Finally some reading resources for learning some important basics:

  1. The Wealthy Barber Returns
  2. The Good, Bad and the Downright Awful in Canadian Investments
  3. Canadian Securities Text Book ( buy it used on Kijiji )

Please do your own research, examples in this post are not recommendations.  

Merry Christmas!!!

Stock markets haven’t priced in a Never Ending Trade War

Investors consider tariffs and the trade war as only being temporary. A U.S. – China trade deal, will sound the all clear signal for markets and the economy. But there are indications that we may be in for a longer, more prolonged set of trade battles. A Trade War could last as long as Trump remains in office.

Consider:

  1. U.S. steel and aluminium tariffs remain in place even after the U.S. signed a new trade deal with Mexico and Canada on Sept. 30.
  2. The administration wants to retain the ability to slap punitive tariffs on China permanently as part of a new trade deal.
  3. The administration is moving to institute $11 billion in tariffs on European aviation imports, and there are concerns that the next step is tariffs on European auto imports.

 

Bank of America Merrill Lynch global economist Ethan Harris has said he expects trade wars to continue over different issues and with different trade partners, even if there is an agreement with China. “The trade war is not going to go away during President Trump’s tenure in office. I think it will go through periods of hot war and cold war,” he said.

 

There are political and economic reasons for a long trade war.

On the political front, Trump campaigned on reviving U.S. manufacturing, reducing trade deficits and making better trade deals.  A continued pitched battle with U.S. trading partners shows his political base that he is fighting for them in hopes of being re-elected. Also, the trade hawks in the Trump administration want some form of permanent tariffs in place and welcome trade battles.

On the economic front, the Trump administration believes that tariffs are a good negotiating tool to force countries to eliminate unfair trade practices. The goal is giving U.S. industries protection to redevelop and gain market share back from China and other low-cost competitors.

Unfortunately, temporary tariffs won’t work. It’s clear that a manufacturing revival requires substantial investment and it takes a lot of time to move plants back to the United States.  Capital will only flow to these industries if it believes its protections from cheap foreign goods is permanent, not temporary.

How tariffs are hurting the economy!

  • Trade uncertainty has damped corporate spending on capital projects.
  • Corporate profit margins are expected to contract because tariffs have increased costs but market conditions won’t allow corporations to increase prices.
  • Share buybacks are at all time highs, a sign of low business confidence.

Year to date, the North American stock markets have been steadily rising. However, first quarter earnings estimates have been reduced and disappointing results could spark a market correction. Fund managers have been getting defensive as one of best performing sectors during the past 12 months has been utilities.

Timing the market is next to impossible but investors are still buying on rumors of a U.S. – China trade deal and probably sell on news. You may want to avoid putting any new money into the markets or raise some cash and wait for a better buying opportunity.

 

 

Santa Claus rally, No, No, No?

Image result for santa claus rally

Is there any hope for a Santa Claus rally this year? What are the chances the markets could reverse the worst December since 1931?

A Santa Claus rally, which would begin on Monday, is a very specific event. It is the tendency for the market to rise in the last five trading days of the year and the first two of the New Year. According to the Stock Trader’s Almanac, it is good for an average gain of 1.3% in the S&P since 1950.

What caused the Dow Jones Industrial Average to have its worst week since the financial crisis in 2008, down nearly 7 percent and cause the Nasdaq to close down into bear market territory?

  1. The Federal Reserve’s rate hike on Wednesday drove the losses this week and investors were hoping for a more dovish tone regarding future rate hikes. Despite the fact that Chairman Powell reduced the projected number rate hikes from three to two and reduced the neutral rate to 2.8% from 3%.
  2. In my humble opinion, President Trump is partly to blame for the severity of the losses this week due to his criticism of the Fed.  He backed Powell into a corner and forced him to show that the Fed is an independent institution. (the Fed could have put more emphasis on being data dependent) According to some reports, Trump has also discussed firing Powell privately because of his frustration with stock market losses in recent months.
  3. In an extensive interview at the White House on Thursday, Trump’s trade adviser, Peter Navarro said that it would be “difficult” for the U.S. and China to arrive at an agreement after the 90-day period of talks unless Beijing was prepared for a full overhaul of its trade and industrial practices.
  4. Political chaos in Washington with partial government shutdown, sudden withdrawal of troops out of Syria and the resignation of Defensive Secretary Mattis.

Investors are still worried about:

  • A slowdown in economic growth as more companies scale back their sales growth and profit outlook for 2019
  • Fear that a flat yield curve will invert if the Fed continues to hike short-term interest rates
  • The unwinding of the Fed’s balance sheet will reduce the availability of credit for corporations
  • The trade war with China will escalate causing more inflation
  • More economists are jumping on the recession bandwagon for 2020
  • Political chaos in Washington will get even worse when the Democrats take power in January

A dead cat bounce is a possibility in January

Image result for dead cat bounce

dead cat bounce is a small short-lived recovery from a prolonged decline or a bear market that is followed by the continuation of the down turn. You need nerves of steel to trade a dead cat bounce but for long-term investors it could be a good time to reduce market risk and re-balance your portfolio.

Image result for merry christmas cat

Option traders are benefiting from trade war fears

Last year was among the least volatile in the history of the stock market. The VIX which measures market volatility averaged a little over 11 for 2017. It was the lowest level for the index since it was introduced in 1986.

Fear is back in the markets as talk of tariffs dominate the financial news media. Choppy markets increase option premiums so it is a good time to write options. The reward for giving someone else the option to buy or sell something has gone way up this year.

Option-writing strategies range from conservative (covered calls and collars) to extremely risky (naked puts). With the virtually unlimited variations of strike prices and expiration dates available, investors can customize their risk/reward parameters with remarkable precision.

Here are three common option strategies that can generate income or limit losses from an investment portfolio.

1. Covered calls and collars

The most common, conservative way to take advantage of rich option premiums is to write call options on securities you already own. If you’re invested in stock funds, you can write on stock indexes although the premiums are generally less than on individual stocks.

For example, say you own 100 shares of Apple at $190.00 and you wanted to generate some income.  Selling a call option expiring on Aug. 17 to buy 100 shares of Apple at the strike price of $195 provides $3.40 of income. That amounts to a 1.7 percent return on a monthly basis, roughly 20 percent annually, assuming you can repeat the process for 12 months.

The risk in the strategy is that the stock rises significantly and your shares are called away at the strike price. In other words, you limit your potential upside from owning the stock in return for the premium income you receive. The option premium also provides a small cushion against losses, but if the stock or index falls dramatically, so will the value of your holdings.

If investors want downside protection, they can buy puts on the position simultaneously. A collar, often called a costless collar, is a strategy that uses the premiums from writing call options to purchase out of the money puts that limit the downside risk on an investment. In the Apple example, you would sell one $195 call option for $ 3.40 and use the money to  buy one Aug 17 put at 185.00 for $3.30

Two things to keep in mind:

  1. The longer the term on a call option, the more premium you’ll receive, but the greater the risk that your investment is called away.
  2. Single stock options pay better premiums than those on an index such as the S&P 500. They are also riskier and more volatile.

2. Straddles are for speculating on short-term price movements

Option straddles are not writing strategies that generate premium income, but rather pure plays on volatility.If an investor believes that a stock or index is going to have a big move either up or down, a straddle can help them benefit from it while limiting the potential risk. The strategy involves buying a put and call option with the same strike price and maturity on a single security or index.

The chart below is the three month price movements of the Dow Jones index which has been very sensitive to fears of a trade war.

For this example I will use the  Dow Jones index (DIA) which closed at 249.30 today so you could buy one Aug 17 $250 call option for $3.10 and one Aug 17 $250 put option for $4.15

Option traders hope that one of the options expires worthless and the other results in a windfall. The worst-case scenario is that the underlying index doesn’t move at all and both options expire worthless. You lose your entire investment in that scenario. The break-even point is when the value of one of the options equals the cost of buying the two contracts. We could get lucky and sell the call option if the Dow suddenly moves up in a short period of time and sell the put option if the Dow moves back down just as fast.

3. Writing cash secured put options or writing put spreads

Financial advisors agree that writing put options when you don’t have the cash to fulfill the contract, is a recipe for disaster. That doesn’t mean you have to avoid writing put option contracts. But you do need to have the cash to buy the shares if the market falls and the option is executed by the buyer. The advantage of writing puts is that they generally carry higher premiums than call options do.

For example, you may like Apple stock but are worried that it’s overvalued at $190. If you write a put option with a strike price of $180, you get the premium income and the opportunity to buy the stock at a lower price.

A put spread is used when you don’t have the cash to buy the underlying stock if it falls. For example, you may not have the money to buy 100 shares of Apple but you think the stock price is stuck in a trading range around $180 to $190. You could sell the Aug 17 $180 put option for $1.95 and buy the Aug 17 $170 put option for $0.70 and net $1.25 if both option expire worthless. The caveat is that if Apple tanks, your potential loss on the contract is limited since you bought put protection at the $170 strike price.

Options are powerful tools that carry embedded leverage and are riskier than owning the underlying security. Premiums are richer now because volatility is higher. Buy a call option and it could become worthless overnight after a bad earning release. Sell a naked put and your potential losses can be catastrophic. Most financial advisors suggest that buying or selling options should be left to experts.

I believe that an investor with a good understand of simple mathematics and the willingness to learn can use options to protect their portfolios and earn some extra income.

Disclaimer: The option trades listed in this post are for educational purposes only and recommendations.

 

 

 

 

 

 

 

 

Sorry America, Canada is imposing retaliatory tariffs on U.S. goods

We have been good neighbours for 151 years and we share the longest unsecured international border in the whole world.  We have fought and died together in too many wars to even count. However, Canada’s foreign minister announced Friday that Ottawa plans to impose about $12.6 billion worth of retaliatory tariffs on U.S. goods on July 1, joining other major U.S. allies striking back in the escalating trade dispute.

Canada’s plan taking effect next week will include imports of U.S. products such as yogurt, caffeinated roasted coffee, toilet paper and sleeping bags. Canada’s announcement is part of larger fallout from U.S. President Trump’s tariffs on steel and aluminum imposed on Canada, the EU and other nations. As a result, some of the U.S.’ biggest trading partners have retaliated with counter-tariffs.

 “We will not escalate, and we will not back down,” Freeland said.

Mexico’s tariffs took effect June 5 on U.S. products such as pork, cheese, cranberries, whiskey and apples. The EU enacted tariffs Friday on more than $3 billion worth of U.S. goods including bourbon, yachts and motorcycles.

The White House’s stated goal in implementing tariffs is protecting U.S. jobs, but the initial business response suggests that U.S. companies are taking a hit. Companies are coping with the tit-for-tat tariffs by increasing prices or making business changes to cope with higher costs.

Harley-Davidson, an American Icon, is an example why Trumps’s protectionist agenda may not work.

In May 2017, Harley said it planned to build a plant in Thailand. Harley’s CEO, Matt Levatich, said the decision was made as part of a “Plan B” when Trump dropped out of the Trans-Pacific Partnership. The plant would allow Harley to avoid Thailand’s tariffs on imported motorcycles and help the company obtain tax breaks when exporting to neighbouring countries.

In January Harley announced plans to close its Kansas City plant, leaving 800 workers without jobs. It will shift operations to another plant in York, Pennsylvania, and hire some workers there, but ultimately there will be a net loss of 350 jobs. Days later it said it would spend nearly $700 million on stock buybacks that would benefit shareholders.

The company also announced on Monday it will shift the production of its Europe-bound motorcycles overseas as a result of the EU’s retaliatory tariffs. It’s not exactly clear which factories will take on the excess production for Harley. However, Harley’s Street-model bikes are made in India for Italy, Spain, and Portugal. More American jobs could be effected.

Harley-Davidson took its tax cut, closed a plant, and bought back stock.

The chart below is Harley-Davidson’s stock price from Trump being elected President to Friday’s closing prices. Is it safe to assume that both shareholders and workers are not benefiting from Trump’s protectionist agenda?

The automotive industry is Trump’s next target for imposing tariffs. Trump’s Commerce Secretary Wilbur Ross plans two days of public hearings on July 19-20 aimed to wrap up the probe into whether imported vehicles represent a national security threat by late July or August.

Two major auto trade groups warned imposing 25 percent tariffs on imported vehicles would cost hundreds of thousands of auto jobs, dramatically hike prices on vehicles and threaten industry spending on self-driving cars.

Lets hope that this trade war with our American neighbours will not accelerate! Wishing them a Happy 4th of July!

 

 

 

 

 

 

“Do nothing” is sometimes the best investment strategy

“Sell in May and go away” is a well-known trading saying that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets. However, there are too many factors influencing the price of stocks and bonds. Trying to predict what the market is going to do is extremely difficult.

If you are an experienced investor, the term “timing the market” probably sounds familiar. It refers to the idea that investors should buy stocks low and sell them high shortly after. It’s a smart, swift and painless method … or is it?

While timing the market is not a new idea, even professional traders, with all the training, tools and time at their disposal, regularly post losses. Some perform well for a while but it’s very difficult to consistently win over the long term.

Nevertheless, there is no shortage of money managers who claim to know how to beat the odds. You’ll find dozens of stock alert services on the internet, all offering to help you with timing the market. Be warned: the odds are very much stacked against you.

A smarter approach is to spend more time in the market by holding long-term investments rather than trying to time the market.

A perfect example is the recent price movements of Facebook after the privacy scandal involving Cambridge Analytica. The stock price fell from the $185 to $155 in a very short period of time. Many investors panicked and sold. The “Do Nothing” strategy would have been ideal in this case. See the year to date chart below:

Stock traders will argue that selling Facebook and buying it back again when the stock price hit a bottom would have been very profitable. In hind sight, it looks easy but it takes nerves of steel to buy a stock that is in a free fall.

We have all witnessed substantial market upheaval in the past. Many of us have had a window seat to watch how Wall Street responds to uncertainty and turmoil. The financial markets don’t like uncertainty. Why? Because it’s extremely difficult to try to predict the future. Take Tesla for example, lots of uncertainty and turmoil regarding this stock which is illustrated in their one year price chart below.

Odds are more traders lost money then made money trying to trade the ups and downs of Tesla over the past year.

Six tips for portfolio success

  1. The first thing to do is to set up your portfolio in a way that won’t keep you awake at night. For most people, a portfolio of stocks or index funds with some bonds probably works best. A good starting position is to consider a portfolio with 30 percent bonds (government bonds and corporate bonds, for instance) with the remainder in equities.
  2. The second thing to do is stop checking your investments frequently. Two to four times a year is all you need.
  3. Have faith, patience and discipline, markets rise and fall continuously. When they’re down it can be tempting to pull out. Commit to your long-term strategy and stay the course.
  4. Tune out the hypeIf you watch the markets every day and read all the opinions, it will drive you crazy.
  5. Remember that cash is an asset class. Look for buying opportunities when the markets are down.
  6. When in doubt, get sound advice. Even if you’ve decided to buy and hold, you still need to know which investment opportunities are proven performers with a likelihood of continued strength. The right advisor will  help you to wisely diversify your holdings.

 

Disclaimer: I do not own Facebook or Tesla at this time.