Wondering if there are some tips in preparing for a potential (inevitable?) recession or bear market? How should one prepare and/or respond?
Thanks in advance.
John
1 Like
Always invest in solid companies and don’t worry about it or try to time it.
3 Likes
I occasionally do a look back a year or two. On the New Paradigm board, back in mid to late 2016 there was already talk of the “bull market being long of tooth.” Yet here we are in 2018 with economic fundamentals as good as they have been since Ronald Reagan’s recover (I would say Bill Clinton but he was the beneficiary of the internet bubble that only popped after he left office - thus it was hyped up growth. Not Clinton’s fault of course).
The long term record of the market is up. The long term record of the market is things go down sometimes.
Yes, buy quality companies. Also, if I may add, make sure you are not in a bubble. I say this because bubble valuations can take a decade or more to recover from, whereas simple market “corrections”, which is simply an absurd and inaccurate term but is the common parlance, great companies recover their former share prices, as long as all else is equal, in due course.
So hold great companies, make sure your not in a bubble.
The question will then come, well how do you know your in a bubble? A question I have responded to many times, and not going to tonight. But if the discussion goes that way I may contribute to it tomorrow.
Tinker
10 Likes
Own compaies you know intimately.
Own companies that are led by honorable people.
Own companies that provide required products.
Own companies that have cash.
Own companies with little debt.
Own companies that can, if not already, be cash flow postive by modifiying their business model.
Know what companies you would sell if companies you like were to become a bargain.
In other words, keep doing what you are supposed to be doing now.
Cheers
Qazulight
22 Likes
Wondering if there are some tips in preparing for a potential (inevitable?) recession or bear market? How should one prepare and/or respond?
The best way to prepare is to have enough gains that you don’t care. Let’s get busy.
Dan
8 Likes
I keep enough cash or equivalent out of the market to cover 5 years of anticipated expenses. With that I can let the market do whatever and not have to take losses with any downturn. Also allows for more aggressive investing.
1 Like
I believe it was Peter Lynch who said it and I may be paraphrasing it. “More money has been lost in preparing for a correction than actually in a correction.”
One of my favorite sayings.
-Fool On
Gaurav
17 Likes
What do you mean by making sure I’m not in a bubble?
And to add to qazus’ list:
Stop watching the stock market news shows on tv and checking your portfolio every single day.
All that fretting and worrying can make for impulsive and dreadful decision making.
But first do all those things stated in Qazus’ list.
Lucky Dog
1 Like
Own compaies you know intimately.
Own companies that are led by honorable people.
Own companies that provide required products.
Own companies that have cash.
Own companies with little debt.
Own companies that can, if not already, be cash flow postive by modifiying their business model.
Know what companies you would sell if companies you like were to become a bargain.
In other words, keep doing what you are supposed to be doing now.
One of the things I insist on is in owning companies that will do business in good times or bad and for which I have paid a reasonable price. Many good to great companies have been recommended and discussed in detail here, but haven’t reached my level of awareness (that is, reached down to my low level of awareness) and thus have placed them on a watch list but not have enticed me into being an owner.
The companies I know, I know what to do with in great times as well as in awful times…if one does not have that level of confidence, and given considerable, honest-with-oneself thought about what procedure to follow when in the grips of fear or greed, and done this thinking-through-it in the boring times…then one is likely to do the exact wrong thing at a moment when it can do maximum damage to ones finances. [BTW…It can be surprisingly difficult to be aware of fear or greed in your own mind while those same emotions are crystal clear when viewing another]
7 Likes
The Bull is even longer in the tooth now.
But age of a bull market is not an actionable event.
I was one of the ones commenting about it but did not change my investing policy.
It might be added that since there are only a relatively few bull and bear markets since 1900, and since the world has changed a lot during that time it is hard to draw any firm statistical data on things like length or extreme height.
Most? Many? bull market do not end in a bang with popping a bubble. They end in a whimper by exhaustion.
Bears that take a decade to recover from are usually accompanied by banking system failures. To get those we usually need a generation of bankers and politicians who have no memory of the last crash .
The banking system seems in OK shape now. not much lending to places like Venezuela, home buyers have to show they have at least some ability to make payments, etc. The big bubble is Government debt , but Japan and other countries have shown that modern economies can function despite massive government debt. And governments don’t have to go bankrupt, they can inflate debt away.
The bull will keep running until it doesn’t. I have presented the board some tools to tell when the odds are shifting against you. And I have a couple of others too. Meanwhile I will stay invested. Not 100% because of age and associated declining analytic abilities.
9 Likes
Tinker
A question I have responded to many times, and not going to tonight. But if the discussion goes that way I may contribute to it tomorrow.
I primarily lurk here as to not clog up the boards - could you elaborate? Or even point me to where you have elaborated before?
I tried looking through your recent-ish posts and couldn’t find anything.
1 Like