When you look at a line chart of the DOW or All Ordinaries and ask investors to look back and point to where they would like to have bought in, almost without exception they point to the major retreats that we call ‘pullbacks’.
But where were these investors when the pullbacks occurred?
Knowing where the bottom is in any retreat is a challenge. Most investors focus on picking the absolute bottom and become frustrated when they can’t locate it. Then they close their eyes and turn their backs on the markets.
How can you best self-manage at such times?
Firstly do not expect to pick the exact low. I work on the basis that I will buy some stocks as we head for the dip and more as the market emerges out of the low. I aim to do at least some buying on the ‘dirty’ days. It is important to develop the skill and confidence to press that ‘buy’ button on the off days. It can take nerve but that is something you develop with experience.
Most big money makers are contrarians and buy when the masses are selling and sell when the masses are buying.
Contrarians very carefully stage manage their entry points and are not living as dangerously as many may believe. They take the view that the risk of further downside during market lows is significantly less than it would be at a market high. Stands to reason.
So what are you doing now? Have you got your hands over your eyes with back turned or are you putting in the hard yards to eke out the bargains?
Enjoy the ride!