It Doesn't Hurt to Be Defensive
02/03/2016 6:00 am EST
When the market is below its 200-day moving average, it means the market is unhealthy. However, as Joe Fahmy of JoeFahmy.com demonstrates, that doesn’t mean sell everything and run, but rather, it means it’s time to get proactive about protecting capital.
Part of my investment philosophy is raising cash and sitting out during unhealthy markets. I’ve received several emails telling me “it’s impossible to time the market” and “you’re arrogant to claim you know when it’s unhealthy.” It’s not called arrogance, it’s called putting in the work, studying history, and having the confidence to act.
If you learn one thing from reading this article, I want it to be this: When the market is below its 200-day moving average, it means the market is unhealthy. That doesn’t mean sell everything and run, but it does mean get defensive and protect capital. Most financial advisors are passive and tell their clients to “sit tight and ride things out.” Forget that! I’m all about being proactive and preventing massive declines from happening. Basically, I don’t want what happened to all my parent’s friends in 2008-09 to happen to my clients now. Unfortunately, too many people lost 40-50% of their retirements from “riding things out” and not taking action. While I don’t think this correction will turn into a 2008 scenario, it still doesn’t hurt to be defensive. To read the entire article click here…
By Joe Fahmy, Trader and Blogger, JoeFahmy.com