A bad day in the headlines is almost always ultimately good for your portfolio.
Seriously.
Today we're going to talk about why and what you can do next to press your advantage.
Here's what you need to know.
The secret to trading "headline risk" isn't really a secret.
Headlines come and go... it's the emotions that drive 'em that trip up most folks.
At least today anyway.
Think about this for a moment...
One minute there's a break in U.S.-Chinese relations, and the Dow goes on a 300-point streak higher. Next minute the manufacturing data comes in a point weaker than expected, and it drops precipitously.
The on-again, off-again relationship between what you understood to be good news is broken. And bad news... well, let's just say it's anybody's guess.
So, how do you get around that?
It's easier than you'd think for reasons I laid out on Tuesday during an appearance on "Varney & Co."
Avoid Doing Anything Rash
Professional traders want you upset, scared, uncertain, and irrational. That way it's easier for them to separate you from your money.
Trading, contrary to what Wall Street would have you believe based on scores of television commercials, is nasty. Professionals are not out there to build their retirement or ensure you build yours.
They want to make as much money as fast as possible by taking your money away from you every chance they get. And headline risk plays a big role in that.
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Wall Street firms don't help or, more precisely, won't. They stand to make hundreds of millions a year in commissions and related trading activity, all of which grow exponentially when individual investors get anxious.
Many will trade directly against the individual investors who are their clients if given the chance. The situation isn't as bad as it used to be but don't think for a New York minute that it isn't happening.
Wall Street sold the rest of us down a river a long time ago.
Stick to What Works and Continue to Buy
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Even if there's more selling ahead.
The idea that you "buy low and sell high" has been around since the dawn of time for a reason.
It works.
In fact, the adage has proven itself repeatedly.
Two of my favorite Total Wealth Tactics - "dollar-cost averaging" and its related cousin "value-cost averaging" - ensure that you continue to buy in at regular intervals.This does three things: 1) actually spreads out risk, 2) lowers your overall purchase price, and 3) boosts your returns.
What's more, both dollar-cost averaging and value-cost averaging can be especially powerful in down markets because they force you to buy the dips on down days everyone else fears at price points that they won't touch.
You're far more likely to score the deal of the century than you are to get burned.
People tell me all the time that they're scared.
I get that.
Emotions run high when the headlines play to your fears.
What I am suggesting is that you harness the logic to overcome that by recognizing that the markets have an upward bias over time and aligning your money to play to that positive possibility, rather than cowering in fear.
Bear markets are not something to be afraid of and instead are a celebration that you can pick up great companies far less expensively than other people believe possible.
Again, I get that this doesn't feel right.
But, so what.
Investors have an abysmal record of predicting short-term market moves ahead of time let alone correctly.
Especially when it comes to stocks like Amazon.com Inc. (NASDAQ: AMZN), for example.
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I've told you for months that Amazon, which is now trading at $1,788.13 a share, could double based on two things: Big Data and growing "Prime" related membership activity.
RBC Capital Markets has recently confirmed my thinking with a report suggesting the stock could hit $2,500 a share as one-day Prime shipping increases subscription revenues, a 40.75% jump from where it closed last Friday. That's lower than my target of $3,000, but the point is that others now see a higher trajectory, too.
That's why it's important to shift your thinking.
Think for a moment... about how many investing trends you've missed out on, even though you knew better and you knew that they were going to be big.
A bad day in the headlines is almost always ultimately good for your portfolio.
And your money!
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The post The Real Secret to Making Money When Faced with "Headline Risk" appeared first on Total Wealth.
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.