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The markets may taper too. How are you prepared for it?

DisasterWe experienced two days in a row of a sharp drop in Wall Street. Is the market heading towards a long expected correction or is this just a dip?

Media is bombarding us with explanations of what’s happening – investors nervous because of bad economic data, bad employment data, bad earnings, slowing China.

And you can feel the nervousness among investors, experts, and folks out there.

Today I have read a prediction from so called experts that the markets may continue falling down because of FED keeping its course and continue in tapering.

On top of that you can find people posting comments such as getting out of the market and stay out in cash. You can feel that they are beginning panicking.

And we only have seen two days in decline.

When reading posts of people saying that they have sold all their stocks and mutual funds and put them into a savings account I feel very sorry for them, shocked for their even worse decision, and happy at the same time for the strategy I selected a roughly year ago.

How are you preparing yourself for a potential correction?

There are a few strategies you may employ to protect your funds, but which strategy is the most superior to others? If you think about your goals and way of investing, set up a few rules, you will come up as a winner from any market correction.

Over the time my investing motto became to sound like this:

My goal is not to reach a certain amount saved or a certain account balance, but make sure all my portfolios can safely generate enough cash flow every month no matter how big the accounts are.

If you shoot for everlasting, growing income, I can only see one strategy which can meet this requirement:
 

  • Dividend Growth Investing strategy
  • Reinvest all dividends
  • Invest regularly thru thick and thin times
  • Stay calm and do not panic, the markets will recover

 

You may argue that this strategy is best for new investors in accumulation phase, but what about those a few years before retirement? Their portfolio will be ruined! Their 401k or IRA accounts would lose 50% as it happened in 2008. What they should do?

Well, if you followed an investment strategy described above, you will not have this problem at all. You will not care what the value of your portfolio is. All you will worry about is your income. And if that stays intact, you will sleep well at night well knowing that your private investing business is doing well.

What are you doing to protect your portfolio? Do you take any extra measures or just stay the course executing your investing plan?
 





4 Responses to “The markets may taper too. How are you prepared for it?”

  1. Fast Weekly says:

    Good morning Martin. I think many investors are forgetting that the US Stock Market has been acting weird for the past few years. We have had unusually low volatility and steadily higher market prices. I somewhat doubt the Fed will actually taper QE all the way to zero, but the markets are beginning to price in that possibility…..hence the volatility. Investors have been too complacent. I am very happy with the investments I have, and with a big sell off I could put a lot more money to work. Here’s to value hunting :o)

    -Bryan

    • Martin says:

      Bryan, I agree. I also think FED will not taper. The economy isn’t strong enough to survive tapering. Well, if the markets fall I will also be happy buying stocks I want for a lot lower price.

  2. Hi Martin,

    I have yesterday received an Email, with the question from a reader if he have to sell his shares now?

    My answer: If you want to hold the stocks for ever, because you need the dividends such as a rent – never sell your stocks!

    Hold straight – wait – and buy shares, if the market is down and there are blood on the street!

    If you sell your shares, you donĀ“t know, when you have to buy the shares back…

    regards

    D-S

    • Martin says:

      Michael, exactly. But many who sell the stock never buy back or end up buying even more expensive than they sold it for.

      Thanks for stopping by.

      Martin



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