Switching to "Defense Mode" During the Market Turmoil!

Wow- September and October will go down in history, and unfortunately, the memories won’t be happy ones. What a market plunge and revelation of how seriously bad shape our economy is in.

This of course makes it a challenge to invest with a long term point of view, unless you really stretch it out to over 10+ years in a perfect storm recession.

The key word now is “defense”. The market has dropped quite a bit from its October 2007 highs. Many folks feel “trapped” in the market- not wanting to do anything since if they move their money out of stocks and stock funds, they fear locking in their losses if the market recovers. The thing is, the market could drop further still, increasing ones losses so there’s risk either way. The reality is we all need to be more active in managing market risk, unless you are fortunate to have a financial manager who actually knows what he is doing. In volatile times like these….if you wish to remain in the market, you have to take on the responsibility of managing your risk and market exposure.

If you do have a financial manager, this is a good time to grade them by comparing your returns to that of the S&P 500 or Russell 2000. A financial manager should be able to show a better rate of return than the standard index tracking funds. If not, you’re better off just investing in an index fund and saving yourself from paying financial management fees.

However, there is one positive aspect to all this market volatility is that there is money to be made if you switch to short term trading….on the order of just a few days to at most a few weeks. It does require more attention spent on research and risk management, but the returns can be worth it. Stocks are making hugh percentage moves in such a short time, that it’s possible to make a years return in gains in just a matter of days.

When the smoke of this Bear Market clears, there will be some excellent opportunities for the long term.

As for now, profits will come to the nimble and swift, which is what I intend on being.

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