Put Together Your Shopping List

Though ETF expert Doug Fabian sees the potential for a market correction given the current economic uncertainty, he has several sectors that he is looking to buy.

How should you be investing and trading some of the big economic issues around the world?  We’re talking about that today with Doug Fabian.  Doug, what’s your take on that?

We look at the market where it is today, near its five-year high, and we have all these macro issues in front of us. There is an element of risk in the market place between now and the election that people need to be aware of. 

I believe that there are enough back-stops against the market so that we’re not going to have an ‘08 right here.  So let’s just say the chance of that is maybe 10%. So there’s a 90% chance that it’s not going to happen.  There is a high degree, in my opinion, that we could have a 20% correction in the market.  So investors who don’t have exposure should really look at that as an opportunity to buy.  If you have a high exposure to the market, then maybe you need to raise some cash so you have some cash to be able to buy. 

There are enough factors in the market, I call them fear factors, that are in play that can influence the direction of the market short term.  I think that people should put those to their advantage by putting together a buy list, and being prepared to be able to buy when the market panics and use price to your advantage. 

So many times people end up just pushing the panic button at the worst possible time in their portfolio.  So now when we know some of these things are going to come in play, why not have some cash, have a buy list, and be prepared to do some buying on some real weak days as opposed to saying I only like to buy something after it’s already gone up.  Well, it’s difficult to make money that way.  So let’s buy something when it’s low and sell it when it’s high.

Aren’t a lot of retail investors though notorious for getting the timing exactly wrong?

Absolutely.

How should people overcome that?

You just have to be aware of that emotion.  I gave a workshop here at the MoneyShow on panic investing, and how you need to realize that this happens.  It happens over and over again, so you have to step back away from yourself. 

First of all, if the market was to fall 20% and there’s something in your portfolio that might go down a lot, maybe you should reduce your position size to a point that you wouldn’t panic. Most people are not thinking about their real next strategic move. 

I think that we’re going to get a good opportunity to place some money long—in the emerging markets is my favorite area, but also in energy, agriculture, agricultural equities.  These are some things that are on my buy list right now that I would love to see fall 10, 15 or 20%, because I can buy those ETFs and long-term growth trends at Nordstroms’ 20% off sale.

Well, great ideas here.  Thank you so much.