How To Trade In A Bear Market
Well the start of 2016 has not exactly been distinguished!
I am sure a lot of investors, even some who thought they were masterful, did their brains as the market hurtled down on fears of, well you name it, it's there. Actually just name any country, we are all in trouble apparently.
That makes life as a master investor pretty tricky. Sell up? Buy on dips? Go short? Hide behind the sofa?
Don't ask me, I can't predict the future and anyone who say they can needs to write or broadcast to make some money.
Hiding behind the sofa actually isn't as silly as it sounds. If you bought a few decent shares now and stuck them away for a couple of years without looking you may well find a nice surprise waiting for you.
There is a tendency in volatile markets to overtrade, trying to second guess what the indices will do next. It is a zero sum game if you do that and chances are you will lose more.
Nothing wrong, though, with a short on the indices to bring in some money and hedging a long portfolio. This is how I handle it, a short FTSE spreadbet and a short ETF for the ISA. Worked well so far. If the markets start to rise, well I can get out with probably not much damage. If they fall heavily shorts will pay out and cover some of the long money.
I do little in volatile markets. Generally happy to ride out my good ones with the shorts to cover. But I also like to buy my favourites on bad market days when everything is being sold due to fear.
So the two I topped up in on massive dips were Worldpay and Paysafe. Yes - both in the same sector, electronic payments. I bought more of both as electronic payments will be one of the sectors of the year and maybe next and I think there is massive upside in both.
Worldpay has just gone into the FTSE 100 and Paysafe has transferred from the AIM market to the main market and so should hit the FTSE 250 in March. Ought to see some funds buying in then.
Out of the two the smaller company Paysafe probably has more upside. Indeed I tend to wonder whether Paysafe will be around at all by 2018. It would be no surprise if it was bought out, possibly even by Worldpay, it would make a lot of sense but remember this is pure supposition on my part.
Both companies look to have decent management, good fundamentals and a bright future. While of course they would go down if the market tanks some more, I would continue to buy on the really bad days and buy shares from the Corporal Jones out there who are panicking.
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