Two Days of Major Wall Street Selling

Stock prices fell hard for the second day on the exchanges, as the selling continued this week, fueled by the uncertainty of the global economics threatened by the spread of the Corona Virus.

Here's the tally on the popular stock averages today. Three percent losses again were the ending to Tuesday, as the Dow Industrials shed 3.1%, and the S&P 500 lost 3%. The Nasdaq Composite lost 2.7%, the bright spot of the group. All 10 S&P Sectors fell today. Bonds rose a tad and Gold FELL after carrying the heavy load Monday.  A diversified portfolio of short term bonds, long term bonds, Gold and stocks fell 1% today.

My thoughts on this. Monday, Gold and bonds were a safe bet as stocks initially fell. Then today, more folks sold, and some leveraged players had margin calls and sold off Gold and bonds. Traders we'll call them, often acting on the floor of the exchanges on behalf of their clients.

We'll experience a snap back rally at some point. But will this be enough to get back into stocks? We'll see.

It's easy to lose perspective of things when these short term setbacks are the focus of our money. Here are the pitfalls of acting this way.

Don't view the markets from the high point they reached; that will set you up for failure. No one buys at the low and sells at the high (not more than once a lifetime perhaps). So view your investment dollars in a longer time frame. Unless you just started investing, you have a track record, and many years ahead of you.

* instead of 2 days, look at February thus far.
* instead of 2 days, look at the last 3 months. 
* instead of 2 days, look at the last 12 months.

The past decade has been very good for stocks. Really good.
 
Consider two investors, Good Luck Gary and No Luck Bill. Bill invested in stocks in late 2007 near Dow 14,000; before the great recession started to unfold. Today, he's ahead 5.5% average each year since then. Good Luck Gary had cash to invest near the market's lows in early 2009, near Dow 7,000. Today, he's ahead 13.8% on average year-over-year. A big difference you say. Yes. But sadly, we can't find any Bill's or Gary's to prove these numbers. 

Let's take the average of 7,000 and 14,000, as it's more likely that investors bought shares when the market was both falling and then rising. So Dow 10,500 is our entry point now. At 27,000 today, that's a  +8.5% annual return. And these tally do not include dividends of 2% or so each year. Not bad.




So, to be a successful investor, you need to know what is working now and take part in it; limit losses, and have a long term view.

If stocks are working, invest in stocks.
If bonds are performing well, invest there.
If Gold and Silver are picking up steam, invest there.
If you are not sure of how to do this, contact me.


You know by now I advocate strongly being diversified with your money, so you don't get hurt when certain investments go against you. Set stop points to protect your profits - or lessen your losses.

I am finishing up an investor quiz that I will post to all who read my blog next month. 

Stay tuned, and e-mail or call with any questions or comments.

~Barry