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The U.S. Stock Market Plunge – What You Need to Know

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message 1: by Philip (last edited Aug 21, 2015 05:53PM) (new)

Philip Fanara | 111 comments Mod
• The U.S. Market is currently at one of its lowest overall P/E ratios in years
• The U.S. Market was devalued 6% ($2 trillion) this week
• Comparatively, its current valuation is at mid-2014 levels (chart linked below)
• Manufacturing, Services, and Technology sectors hit hardest
• Conglomerates and Utilities fared best
• The bigger they are, the harder they fall – Positive 38% correlation between a stock’s P/E at the start of this week and percentage lost at the end of the week

Summary: Don’t let a market dip freak you out; the stock market routinely fluctuates up and down.
Strong companies survive and even flourish after dips. Overvalued, hyped companies crash to pennies.

Invest wisely and prosper from other people’s fear and greed.

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message 2: by Philip (new)

Philip Fanara | 111 comments Mod
Oh boy - how ridiculous was today's market volatility?

Case in point - When a Large Cap ETF drops 50% in an hour, this is one of the safest and quickest ways to double your portfolio ever.

Today was a prime example of how money funnels from the portfolios of emotional traders to the portfolios of rational traders.

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message 3: by Philip (new)

Philip Fanara | 111 comments Mod
Market Update

Over the recent weeks we have seen one of the most volatile markets in years.

Stocks plummet, correct upwards, only to plummet to even further levels the next day. Speculators are running rampant with opinions whether the market is under or overvalued.

As stated in The Stock Market Outsider, this period of correction would eventually come…and it has. And for those of you that have been following the strategy outlined in the book, you have used the recent volatility to flip multiple stocks/Put options for quick gains, and likely still hold some stocks that dipped in August and have not yet recovered.

Don’t be tempted to sell just because everyone else is selling. As long as you are holding positions in strong, undervalued companies – you will see a rise in the future. It may take a few days, weeks, or even months… however history always shows us that the stock market does recover.

This is the time when people make the most money in stocks. The prosperous ones are those that invested wisely and kept their emotions in check. The losers are those that bought into the hype and were unlucky enough to be the last ones holding the overvalued bag when the market corrected itself.

Keep a cool head, continue strategically investing in the market if you have free funds available, and watch as the fools kick themselves later on for buying overvalued companies and selling for a loss.


message 4: by Philip (new)

Philip Fanara | 111 comments Mod
The Rebound

In my last update I recommended keeping a cool head and continue investing in undervalued stocks because this is when the most money is made in the stock market.

Those that followed this logic have made tens or even hundreds of thousands of dollars within a few days. I have come out with a nice gain as well.

As expected, the market has rebounded upwards over the past few days and is now trending closer to its median P/E valuation (see link below).

What does this mean? Well, although the market can never be predicted with 100% certainty, in my opinion we are due for a temporary drop in the next few days. Not only because it is trending closer to its median value, but a significant movement in one direction (this time up) usually means a temporary reversal afterwards.

I am personally planning on selling the positions I purchased over the past few days for a very nice gain, and will buy back in on the flip side.

Invest wisely and become rich from others’ irrational greed and fear.

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