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In the past couple of weeks, we've been seeing record highs in the markets nearly every day.
However, we saw a pretty scary headline earlier this week about the Nasdaq Composite Index.
On Monday, Bloomberg reported that nearly half of the stocks in the tech-centric Nasdaq have declined 20% from their highs of the past 12 months – putting them in "bear territory."
Now this decline is mostly in small caps, which I don't cover in Strategic Tech Investor. However, Nasdaq small caps are not the only place we're seeing jitters in the overall market.
Even with interest rates so low and the economy steadily improving, many nervous investors – worried about a correction – are selling off.
Whenever there's this sort of negative noise in the air, I tell you it's not a time to sell – but a profit opportunity for tech investors.
So, today I want to share with you three strategies designed to turn market declines to your financial advantage.
With them, you'll leave the nervous sellers in the dust…
Reduce Risk and Increase Profits
This week's negative headlines remind me of a conversation we had earlier this year.
On April 11, I noted that some pundits were talking of a tech crash in the making. My note cut to the chase and said, "It's not time to panic… It's time to buy."
Since then, the Nasdaq has posted 15.16% gains. That's nearly double the Dow's 7.7% profits and significantly higher than the S&P 500's 10.85% gains.
I'm not pointing this out to brag (well, maybe a little) but to show you that when I say the road to wealth is paved with tech, I'm using empirical data to make that statement.
Sure, there are periods when tech goes out of favor. But that is true for every single sector of the U.S. economy, from finance to consumer goods to construction.
But over the long haul, high tech presents investors with the greatest number of opportunities to beat the market. After all, tech is where most new opportunities come from in the first place.
So, I haven't lost even a small amount of confidence about tech's wealth-building abilities. But it does pay to be prepared for market corrections.
With that in mind, here are three risk-control strategies that will help you build more wealth.
Risk-Reduction Profits Strategy No. 1
Focus on Quality
Before revealing my first risk-reduction strategy, let me welcome any new readers with us this week.
When I launched Strategic Tech Investor in the spring of 2013, I provided details of my five-part system for creating tech wealth. And I encourage the newcomers among us to peruse those first few columns after reading today's report.
I designed these five rules to find you high-quality companies. These are companies whose stocks have the baked-in ability to double and triple your money.
And all these companies have several things in common. Great leadership is imperative. You're looking for a CEO with a proven track record of making money for shareholders.
We also want to find well-run companies. These firms have a track record of earnings growth and excellent operating margins, preferably higher than 20%.
At the same time, the companies we choose are leaders in fields that will grow for years to come, such as cloud computing, Big Data, and the mobile revolution.
Focusing on quality greatly stacks the deck in your favor during good times and bad. In fact, tough markets often bring what I call "a flight to quality" – stocks so good that investors gladly buy on the dip.
Risk-Reduction Profits Strategy No. 2
Work Your Shopping List
People grouse all the time about not being able to find good stocks. I think that's lack of discipline, however, not a lack of good stocks.
In fact, you don't even have to be an active investor to come across more good stocks than you can buy at any one point in time.
This is where being a disciplined and focused investor comes in handy. You should be looking for proven winners, not just buying cheap stocks and hoping they go up.
You are going to find intriguing companies that you just can't act on for any number of reasons. Never throw an idea away. Just put those stocks on your "shopping list" for a day when you are ready to pounce.
Trust me, that day will come. Maybe you want to close out a big winner, or perhaps you need to cut a couple of weak performers from the portfolio – or we could always get a market correction and you get stopped out of a few positions.
That's why it pays to have a list of stocks you'd really like to buy when the time is right, such as right now when many quality stocks are trading at a discount.
Then there's "the winners that got away." Those are the market leaders you heard about too late to get in on but you'd love to buy on a correction.
That's one of the reasons why we discuss so many stocks at Strategic Tech Investor. I want you to have the world's best tech investing shopping list.
Risk-Reduction Profits Strategy No. 3
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About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.