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When Stocks Are On Sale

This caught my eye as I tend to look at stocks when they near a significant, long-term support such as a 100 month or 200 month EMA or SMA.  Of course I'm buying with a long term perspective in this approach but it got me wondering: Is is better to hold your breath and simply buy stocks when they've sold off 20%? The downside still terrifies me but looking at historical returns is intriguing.   From Awelathofcommonsense:

Large cap U.S. equities continue to hold up well with the S&P 500 down roughly 12% from its all-time highs reached last spring. To some degree, this performance has masked the global bear market going on in the rest of the world. Take a look at this list of country ETFs from Bespoke Investment Group:

 

Screen Shot 2016-02-10 at 10.21.57 AM

The average drop from the 52-week high on this list is just shy of 30%. Not too pretty. But beauty is in the eye of the beholder in these situations. Historically, buying global stocks after they have fallen into bear market territory has been rewarding for investors.

I

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Admin

u-s-stock-trading-canceled-because-of-hurricane-sandy-11846ba5b3.jpg?width=300Intellectually I knew there were two forms of market participants already: price-sensitive “investors” and price-insensitive “traders”.  The former buys low and sells high, and has a process for determining why they are doing so.  The latter sells low and covers lower, or buys high and sells higher.  Both are entirely legitimate ways to make returns in any market, but it’s important to distinguish between them; who you listen to and surround yourself with will inform your market view and trading positions.  When the stock market opened for its “Black Monday” on August 24th, those selling were “traders”, whether they want to admit it or not.  They didn’t care what level prices were at, just that they were going down. “Get me out, NOW!!!”  Those who were in buying blue chip, mega-cap, high quality secular growth stories at 10 or 20% discounts to that day’s close? They were investors.  More on this below, but when you’re in a crash, make sure that you’re not trying to inform investing dec

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