Extreme Caution Is The Word of The Day

caution sign

What goes up…

My promise to you from the first blog post was to be up front and honest with you about everything.  I intend to keep my promise.

This year the stock market took a deep dive like no one has ever seen before.  The market fall in 1929 was probably very similar.

You can say the same thing about the way the market has turned around and shot back up like a rocket.

…may continue going up

Now the markets are going up almost every day and when they do decline it is not much of a decline.

It would be nice to see a pullback in the markets so the markets can catch their breath, but so far that has not happened.

Why, because the markets did not fall because of high interest rates and high inflation, high unemployment or excessive business regulations.

In fact everything was going great until the pandemic.  Then the equity markets went from being bullish to bearish in no time.

But

Many years ago I owned mutual funds that were performing extremely well.  They were going up in value extremely fast.

But, then their share prices took a fall.  I don’t remember how much the markets fell at that time since it happened a long time ago.

What I am seeing today resembles what I have seen in the stock market before.

Usually, when you see the market(s) going up like they have been doing since the beginning of April 2020 it is a good idea to take some or all of your money out of the market and wait for a pullback before getting back in.

In fact Warren Buffett, who is considered on of the most successful investors in the world, sold all of his airline stocks not too long ago.

Did he make a mistake?  I think it is too early to tell.  He has a lot of money sitting in cash right now waiting for the right buying opportunity.

But, this is not your typical stock market behavior.  In fact the stock market is behaving far from normal.

So, what is a small investor to do?  BE CAREFUL!  Keep an eye on your investments.

The good news

On Friday, June 5th, the DJIA gained 829.16 points to close at 27,110.98, a gain of 3.15%.

The NASDAQ rose 198.27 points, up 2.06% to close at 9,814.08.  It finished trading on Friday less than four points from an all-time closing record high set on February 19, 2020.

Last but not least, the S&P 500 closed at 3,193.93, up 81.58 points, up 2.62%.

Here are a number of positive things for investors and a rising stock market:

  • there is a business man in the White House
  • In a little less than five months there is a presidential election
  • the pandemic seems to be under control
  • new USMCA trade deal will be coming online
  • businesses are starting to open back up across the country
  • businesses are returning to the U.S. because of fewer business regulations
  • more people are going back to work and unemployment is dropping
  • low interest rates
  • low taxes

 

It is my opinion that this president is going to do everything in his power to keep the economy healthy, at least until election day.

The bad news

All bets are off on everything right now after election day.  Depending on who wins the presidential election in November, the markets could react in a positive manner or in a negative manner.

If you own any securities, and if they are profitable, you should know what you paid for them so you can figure out a price point where you sell some or all of your investments.

Yes, I told you to buy and hold long term.  But, for me, in this market all rules on buying and holding are off the table.  Taking a profit on your securities is a good thing rather than a bad thing.

I won’t be complaining if I make 12% on my money in a short period of time instead of taking a 5% or greater loss.

Of course, I may have missed an even greater profit if I continued riding the market up, but there are no guarantees that the market will continue to go up.

One of the nice things about dollar cost averaging is that even in a volatile market you won’t be buying at the top or at the bottom, in most cases.

If you are young, you would want to have the market dropping and then when you are old and the market is up you come out way ahead using dollar cost averaging.

Once markets return to normal, if that ever happens again, then you can buy and hold long term.

I can’t give investment advice so please don’t take anything I say on this blog as investment advice.

Hopefully, sometime within the next six months or so I will be taking the Series 65 securities exam and if I pass it I will be allowed to give investment advice.

When I have a Series 65 securities license I will not be allowed to sell any type of securities.  I will only be licensed to give investment advice.

I would need to obtain another securities license in order to sell securities.  I am not planning on getting a Series 6 or Series 7 securities license at this time.

If you read my earlier posts about selling my two ETFs it appears that I made a mistake and sold too early.  But, maybe my decision to sell them was not a mistake.

In fact, maybe in the not too distant future the value of VDC and SRVR ETFs will drop below what I sold them at.  I don’t know.

I made a small profit on both ETF fund sales so that is a good thing.

The decision to sell these two ETFs was based on my knowledge of the market and research.  There was some caution thrown in too for obvious reasons.

In conclusion

  • don’t try to time the markets
  • do your own research
  • be cautious
  • don’t buy high and sell low

 

Please leave a comment and let me know if you are bullish or bearish.

Happy investing,

Jim Juris Signature

P.S. If you think your friends would find this information beneficial, please share it with them. Thank you.

 

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