WHO WINS IN A DOWN MARKET?

With several days of decline and new global worries it seems the small investors have run out of reasons to stay invested. They have seen some of their best picks slowly sinking past the point of profit and now they debate selling at a loss. Is this trend going to continue?

If you turn on the news you will see some long faces talking about how bad yesterday was and what may happen tomorrow. It all boils down to the fact that no one knows. There have been several events that pushed the selling to a tipping point and then the impulse to just sell and walk away was too great for some investors. A large percentage of TSX-V investors who trade for themselves lose money. Now you know why. In a down market you should go through your portfolio and decide why you bought each stock that you are in. Take away the emotion and sell some you probably realized had reached their peak but you fell in love and have still been holding. Those stocks don't love you back and if you don't put profit in your pocket when they are at their peak then why are you investing in the first place?

Now look at the ones that have been flat and have not done anything for your bottom line, did you buy them on hype or because some guys from the office bought as well? Is support backing away from the company?
Clean house on the ones you really did not believe in and bought with the herd. I am sure you also have some stocks you bought because you did all the right things, you did your due diligence and you made the right move and took a position based on the financial position and the growth you see for this company. Then why are you thinking of selling? I have seen some investors get caught up in selling and think going liquid will solve their problems. All your going to do is lower your net worth and hand off some great stocks to an accredited investor who knows this is a buyers market. There is no market for dogs though or companies who recently announced another reverse split. These are ticking time bombs and I have yet to see one come back from the dark side and emerge stronger. 

So now lets talk about the cash you just added to your account when you sold off some dogs and a couple high flying winners. What will you do with that? I know your banks savings account does not pay a lot of interest and here you were starting to think you could be a trader full time and leave that day job. Well running with that cash and hiding while you get ready for another week at the office may be the worst move you can make.

For every news story out there saying things are not looking good on the markets these days there is an equal amount of stories by investment gurus saying these are your best days for shopping on the markets. These are sale prices without rhyme or reason. There are some great companies about to emerge without you right now. They have lots of cash, a product ready for market and a strong investor following. As well there are institutional investors slowly eating away as they watch for small retailers in sell mode. You have had a taste for trading and seen where the big money is and now you have reached your final test, find the true bargains in a down market. Who is selling at a large discount? Who has twice as much cash in the bank as they do market cap? Who has seen slow selling on drift yet you know they are a solid long term growth story?

So many company's have drifted back on light volume due to a lack of support. There just are not enough good bids to support the stock because everyone wants to watch. Then along comes someone who wants out and they do a market sale and now the stock takes a hit. In the end you will make the choice that's right for you and your level of risk. I am spending my days watching for the bargains. Looking for a place to maximize my return when the markets rebound. History repeats itself over and over and the markets always rebound and end up setting new highs. The strong stand up and say "I told you", while the weak count their regrets and search the want ads for another way to get themselves out of the 9-5 their in. Don't give up, buy smart and sell smart and you will be the one standing at the end of every year and looking for ways to cut down on your capital gains.