Professional Investors Don’t Need To Be First To The Party

| May 15, 2012 | 1 Comment

If you’ve been long stocks, you can’t be happy about the market’s recent price action.

Sadly, the S&P 500 has gapped down at the market open for eight out of the last nine days.

Obviously, this is a very troublesome market.

However, even in a market that’s acting poorly, there are always investors who can’t control their desire to step in and buy stocks.

They always seem to have plenty of bullish arguments.  They’re convinced that the selling is not justified. They talk about all the great bargains and about how conditions support much higher stock prices.

Here’s the thing, sometimes they’re actually right.  And they can make us feel quite foolish not sharing their optimism.

They may be correct in thinking that things really aren’t that bad, but professional investors can’t be fooled.

They know what the average investor doesn’t… there’s no reason to call the exact bottom.

Let me explain…

In a market that’s obviously trending down and struggling to hold key support levels, there are some questions you should be asking yourself before attempting to call a market bottom.

If you aren’t fully invested at the very moment the market makes a low, are you really going to miss out on huge gains?

In other words, if you try to time a market bottom, you’re almost guaranteed to be wrong.  So, you’ll be sitting on some sizable losses when the market finally does turn.

You see, the way most investors view the market is largely just a matter of style. 

But when the market is acting like it has been, you need to constantly be aware that sometimes the anchors on TV don’t necessarily trade.

However, they can’t just stand aside and do nothing because they need to keep people involved.  That’s their job!

Their excitement about the market has a little more to do with keeping people interested instead of helping them make good investment decisions.

I hope this makes sense to you.

You see, the point is…

There have been many long periods of time when the best move for investors was to simply be in cash and to ignore the market.

Unfortunately, it’s rare that you hear any discussion about this.

It simply isn’t acceptable that you’re not always told about great buys or bottoming market trends.

I’d love to write that now is the time to hurry up and buy this long list of stocks that are great value, but I simply don’t believe it.

The time to buy stocks is when the market is trending up.   And simply put, they’re not right now!

However, when the market does turn, you can buy stocks just above their lows at slightly higher prices.  I view this as a way of ensuring that I don’t buy stocks too early. I may miss out on some gains but I won’t rack up losses by jumping the gun.

Bottom line…

By any measure, the market is very erratic.

We can either accept this or we can run around anxiously trying to anticipate the exact moment the market bottoms.

Frankly, I’ve always enjoyed parties much more when the action has already started and I show up late.

So, just stay patient.

Safe Trading,

Marcus Haber

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Category: Options Trading Basics

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.

Comments (1)

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  1. Matt C. says:

    so true.. in the bear market it is better to go short.

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