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How the Market Works

Which Investments Would You Prefer in the 2016 Market Crash?

Posted by kdadmin on January 13th, 2016.

Which Investments Would You Prefer in the 2016 Market Crash?

Which 2016 Investment Would You Prefer?

Look at this chart. Which two investments do you hope make up 90% of your portfolio?

This is NOT the End of Days.

Mew, mew, mew. Everybody is whining about the End of Days in the January 2016 market crash. The last time the market cratered like this, in August 2015, I was posting about it every day.

Well, no more. Why be another talking head when the REAL answer is always the same? If you’re a conservative to moderate investor (i.e. retired or retiring in five years), you probably should not have owned stocks in this recent market (the last three months). End. Hopefully, your investment portfolio was concentrated in AGG (an ETF that tracks the aggregate bond market) and CMR (a sample money market fund), instead of SPY (an ETF that tracks the S&P 500). Look at the chart above. You would have done far better.

Look, there is a time and a place for stocks. This year, the time is when everybody else is terrified that the bull market has given up the ghost, and you start to hear inane things like S&P 550 or 666.

Really? 666? I mean, doesn’t that writer think that going all “sign of the beast” on the stock market today would make them look like a total jackass? This isn’t the end of days. I haven’t seen the four horseman or a flock of locusts, so I’d say we’re safe.

Back to Reality.

The Fed Beige Book data release today was mostly upbeat, with 9 of the 12 regions reporting positive economic news, including stronger hiring and economic activity. Boohoo, China is a mess. That’s not new. Oil is in the tank (ba-dump bump), which also is not new. And North Korea has the bomb. Does that pretty much sum up the doom and gloom out there? We’ve heard this all before.

More importantly, enter the Fear and Greed Index, which today reads 14. Out of 100. Ten days ago is was 44. In other words, more people are more afraid of market disaster now than they were ten days ago. Notice how this is backwards? People aren’t afraid until there IS a disaster. They aren’t greedy until there IS a market high. This is stupid. Firms that wait until the market tanks to yell “sell” clearly don’t have the foresight I’d want from an advisor.

The time to be fearful is at a market high. This is when the risk of loss is the highest. The time to be greedy is at a market low. This is when the chance of gain is the highest. This is how the market works.

Going Forward.

Since the beginning of the year, the S&P 500 isdown nearly 8%.

Are we at a market low? Maybe. It’s not as low as it was in August, 2015, but it’s a lot lower than it was 10 days ago … What do you think I’m going to be doing now? For the answer, read my article, China is a Wonderful, Troubling Thing: How the Market Works.

For the answer about what YOU should do going forward, contact me.


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