Making Money in a Bear Market
Just because the stock market is recently down does NOT mean that it is impossible to profit. In fact, some of the best gains have come in the recent weeks due to the high market volatility.
Simply put, if a company is strong and undervalued, chances are it will eventually rebound – even if it is only for a short period of time.
Intraday market movements are great opportunities to compound your portfolio multiple times per day. For example, recently I have been daytrading FVL, FAB, FTA, and FNK – all ETFs derived from index funds.
ETFs provide natural diversification that reduces the need to carry multiple stocks. This allows one to invest a larger portion of their portfolio in one security, which subsequently allows frequent selling (and compounding).
As you all know, I am a big proponent of SAFELY compounding your portfolio by frequently trading undervalued stocks.
When the market is as volatile as it is now, it can be difficult to predict exactly which stock will yield a 3% gain. However, a temporary alternative is to use the same strategy for index funds when the overall market is undervalued.
The current stock market P/E is about 18, which has not been this low since late 2013.
Can it go lower? Sure. However, history tells us that it will eventually rebound, and in my opinion it’s much more profitable to compound your portfolio during times of high volatility than allowing your portfolio to ride the peaks and valleys of the market with no compounding.
As mentioned in The Stock Market Outsider, people who left their money sitting in the Nasdaq over a period of 18 years would have earned mere peanuts compared to someone who WISELY compounded their portfolio through buying during dips and selling during peaks.
Simply put, invest wisely and profit.