Surviving in Any Market

There are times when running and hiding is an absolute must in order to survive the current market.  Most of us develop a way to invest and trade in the stock market.  Some of us buy when we see momentum, some buy when we see value and some just buy regularly no matter what happens in the market.  Obviously, different market conditions will dictate the type of behavior that will be rewarded.  So unless you can adapt to different environments and make money in any market and switch your behavior on a dime (something I certainly cannot do), back out.

Yes.  Simply back out of the market.

In the current bear market, tons of people are losing money.  Even Warren Buffett is losing billions of dollars these days.  Remember how smart everyone thought he was when he injected $5 billion into Goldman Sachs (GS)?  How does the $115 strike price look now when the stock is trading at $70 and change?  How about GE’s $3 billion dollar bet at $21.50?  Warrent Buffett is a value investor, and this just doesn’t work in a market that is driven by fear.

There will be a time when Mr. Buffett’s investments in GE and GS are worth more than $3 billion and $5 respectively in the next 20 years, but the point is that he could’ve waited another month and bought those two stocks at 20%-30% off the price he paid.

If the legendary investor can make bad moves in some environments, shouldn’t you evaluate how you can survive too when it’s so easy to do?

Once you are ready for an evaluation, just simply think of when you made the most money and map that to certain bear and bull markets.  If you like shorting stocks, you will no doubt make more money during bear markets.  if you do nothing but go long, then by all means wait this recession and bear market out.  There will be tons of opportunities to make money in the future.