Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Nervous Investors Will Hate the Money You Make With This Strategy

Companies / Investing 2014 Sep 20, 2014 - 09:48 AM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: In the past couple of weeks, we’ve been seeingrecord highs in the markets nearly every day.

However, we saw a pretty scary headline earlier this week about the Nasdaq Composite Index.

On Monday, Bloomberg reported that nearly half of the stocks in the tech-centric Nasdaq have declined 20% from their highs of the past 12 months – putting them in “bear territory.”


Now this decline is mostly in small caps, which I don’t cover in Strategic Tech Investor. However, Nasdaq small caps are not the only place we’re seeing jitters in the overall market.

Even with interest rates so low and the economy steadily improving, many nervous investors – worried about a correction – are selling off.

Whenever there’s this sort of negative noise in the air, I tell you it’s not a time to sell – but a profit opportunity for tech investors.

So, today I want to share with you three strategiesdesigned to turn market declines to your financial advantage.

With them, you’ll leave the nervous sellers in the dust…

Reduce Risk… Increase Profits

This week’s negative headlines remind me of a conversation we had earlier this year.

On April 11, I noted that some pundits were talking of a tech crash in the making. My note cut to the chase and said, “It’s not time to panic… It’s time to buy.”

Since then, the Nasdaq has posted 15.16% gains. That’s nearly double the Dow’s 7.7% profits and significantly higher than the S&P 500′s 10.85% gains.

I’m not pointing this out to brag (well, maybe a little) but to show you that when I say the road to wealth is paved with tech, I’m using empirical data to make that statement.

Sure, there are periods when tech goes out of favor. But that is true for every single sector of the U.S. economy, from finance to consumer goods to construction.

But over the long haul, high tech presents investors with the greatest number of opportunities to beat the market. After all, tech is where most new opportunities come from in the first place.

So, I haven’t lost even a small amount of confidence about tech’s wealth-building abilities. But it does pay to be prepared for market corrections.

With that in mind, here are three risk-control strategies that will help you build more wealth.

Risk Reduction Profits Strategy No. 1: Focus on Quality

Before revealing my first risk-reduction strategy, let me welcome any new readers with us this week. When I launched Strategic Tech Investor in the spring of 2013, I provided details of my five-part system for creating tech wealth. And I encourage the newcomers among us to peruse those first few columns after reading today’s report.

I designed these five rules to find you high-quality companies. These are companies’ whose stocks have the baked-in ability to double and triple your money.

And all these companies have several things in common. Great leadership is imperative. You’re looking for a CEO with a proven track record of making money for shareholders.

We also want to find well-run companies. These firms have a track record of earnings growth and excellent operating margins, preferably higher than 20%.

At the same time, the companies we choose are leaders in fields that will grow for years to come, such as cloud computing, Big Data and the mobile revolution.

Focusing on quality greatly stacks the deck in your favor during good times and bad. In fact, tough markets often bring what I call “a flight to quality” – stocks so good that investors gladly buy on the dip.

Risk Reduction Profits Strategy No. 2: Work Your Shopping List

People grouse all the time about not being able to find good stocks. I think that’s lack of discipline, however, not a lack of good stocks.

In fact, you don’t even have to be an active investor to come across more good stocks than you can buy at any one point in time.

This is where being a disciplined and focused investor comes in handy. You should be looking for proven winners, not just buying cheap stocks and hoping they go up.

You are going to find intriguing companies that you just can’t act on for any number of reasons. Never throw an idea away. Just put those stocks on your “shopping list” for a day when you are ready to pounce.

Trust me, that day will come. Maybe you want to close out a big winner, or perhaps you need to cut a couple of weak performers from the portfolio – or we could always get a market correction and you get stopped out of a few positions.

That’s why it pays to have a list of stocks you’d really like to buy when the time is right, such as right now when many quality stocks are trading at a discount.

Then there’s “the winners that got away.” Those are the market leaders you heard about too late to get in on but you’d love to buy on a correction.

That’s one of the reasons why we discuss so many stocks here at Strategic Tech Investor. I want you to have the world’s best tech investing shopping list.

Risk Reduction Profits Strategy No. 3: Make Split Entries

This is a process I use all the time. It’s a great way to move into a potential big winner in a bull market and make sure you don’t overpay. Plus, you also pick up extra profits.

For example, let’s say XYZ Mobile Corp. has been on your shopping list. It was trading at $33 but has since retreated to $25, a price your research reveals to be a great bargain.

You enter this position in a series of tranches. This could be as few as two or as many as four. Let’s keep it simple and look at a two-tiered entry. In this case, we buy half at market at a price of $25 a share but with no stop loss.

As soon the market order fills, you then enter what’s called a “lowball limit order.” What this means is that you tell your broker that you want to buy a second tranche of XYZ Mobile at a much lower price. A 20% discount is a good principle for filling the second half.

You would then enter a “limit order” for the second round of XYZ at a price of $20 or lower. If the stock falls to that price, your order automatically fills, and you now have an average purchase price of $22.50.

Once the stock resumes its climb, you have baked in extra profits. For instance, when XYZ hits $30 a share, your cumulative gains are now better than 33%. ($30 minus $22.50 divided by $22.50 equals 33.3%.)

Had you simply bought the stock and held, your returns would have been 20%. Split entries are a powerful way to ride out market retreats and make extra money in the long run.

Now then, whenever I discuss portfolio management, I invariably get a question or two about complex hedging strategies. That’s really beyond the scope of what we do here at Strategic Tech Investor.

Fact is, Wall Street has an army of experts who run sophisticated hedging strategies on supercomputers all day long. Individual investors just can’t do anything remotely that complicated.

However, you can “hire” these pros at a fraction of what Wall Street pays them. You do this by investing in “inverse” exchange-traded funds (ETFs). As the term implies, inverse ETFs often short popular benchmarks.

For instance, the PowerShares QQQ (NasdaqGM: QQQ) is an ETF that serves as a tracking stock for the Nasdaq 100. There is also an inverse ETF that basically shorts QQQ, giving you insurance against tech declines.

It’s the ProShares Short QQQ (NYSE: PSQ). The good thing about this type of inverse ETF is that it pays you when the Nasdaq drops roughly on a 1-to-1 basis. For every percentage point the index goes down, PSQ rises by that amount.

However, this is really a very short term play you must use with caution. Holding an inverse ETF like PSQ for more than a few days could end up costing you money.

After all, when the Nasdaq rallies again, PSQ goes down.

So, you now have three long-term strategies and a short-term “bonus play” you can use to keep your portfolio moving forward during any market retreats that may come our way.

And if you put these tools to good use, you’ll find you have the skills to profit when other investors panic.

Source : http://strategictechinvestor.com/2014/09/nervous-investors-will-hate-money-make-strategy/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in