Last week was fun, wasn't it? For the first time in many months, we saw some big down days as investors got a little panicky over the potential for higher interest rates, midterm elections, and anything else there was to get worked up about. Of course, this immediately started all the chatter about what happens next.
Are we going to have a bear market now? Will prices collapse? Should I sell? Should I buy more? What is the stock market going to do next?
If you think you actually know the answers to those questions, you may be a hamster.
Hamsters can run around in a circle like nobody's business. They may think they're going somewhere, but let's face it – they're not.
You won't get any insight at the top of a hamster wheel that you couldn't get at the bottom.
One of the incredibly powerful things we do at Heatseekers is eliminate the hamster wheel entirely. Instead of focusing on things that don't matter, we take a cold, hard look at the numbers that do.
Anyone who confidently predicts the next move in the market is either fooling themselves or trying to fool you.
I have been doing this a long time, and the stock market never does what we all think it should. I have seen markets rally on bad news and sell off on good news. While stock prices will reflect the value of the companies in the long term, in the short run it's more of a psychological soup that often responds irrationally.
Making drastic moves based on your – or anyone's – forecast of market direction is usually a fool's errand. You will end up running in place like our furry friend and not getting much of anywhere.
If you really want to see what's going on, you need a much bigger wheel (like a Ferris wheel) that will give you a much better view.
Critical Update: Forget Tech or Crypto, This Will Be the Next $1 Trillion Industry
That means being aware of where we are in the long-term economic and market cycle… and making smart numbers decisions that help us profit…
The View from the Top of the Cycle Shows We May Not Be Up Here Much Longer
Buying stocks when valuations are high and prices have been rising for a long time is probably not going to work as well as when prices are falling and stocks are on sale. We cannot predict what the markets are going to do, but we can be aware of risk levels and adjust our approach accordingly. Being aware of where we are can help us be fearful when others are greedy and greedy when others are fearful, as Warren Buffett has often suggested.
If we look at the world today, we see some pretty late-stage action.
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of "Max Wealth" and Heatseekers.