Guidelines: Back to Basics

10/17/2014 9:00 am EST


Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

At times like this, it’s always good to review some basic investment tips to follow, no matter what the markets are doing; these guidelines are simple but they’re important, counsels Mary Anne and Pamela Aden, editors of The Aden Forecast.

These observations are like going back to square one, but hopefully they can save you a lot of time, trouble, anguish, and money. In most cases, we’ve learned these lessons the hard way and we’re still learning. The ones most important are…

• Know yourself

Are you conservative or a risk taker? Young or old? Fearful or greedy? Think about it and face yourself. This will help determine what types of investments you’ll go into and by how much.

The bottom line is risk versus reward and by knowing yourself, you’ll know how far you’re willing to go or not go.

• Don’t let opinions overwhelm you

Opinions are everywhere…on TV, the Internet, friends, experts, and so on. This can be confusing, especially the day-to-day stuff.

If something makes sense, it doesn’t mean it’s going to happen. Very often, things that are correct don’t make sense. That’s why relying only on market fundamentals can be tricky. It’s also why charts are so important.

The price action in any market will tell you the story. But interpreting the story is the key. That’s where we can sometimes go wrong because we don’t quite understand what the market is telling us. And it may be contrary to what you’re thinking.

Remember, the markets don’t care about your opinion. So stay humble and never tell the markets what they should do. When you’re contrary to what’s happening, it usually doesn’t end well.

• The trend is your friend

Whether you agree or not, if a trend is in motion, that’s where you want to be. That’s especially true for major market big trends. That was the case for gold from 2001 to 2013, the stock market from 2009 to the present, and bonds this year.

Keep in mind, markets lead, so the reasons why may not be obvious when a major trend is getting started. Ideally, the trends and the fundamentals will coincide. That’s the best of both worlds, but it doesn’t always happen. When in doubt, go with the trends and maintain caution, just in case.

•Watch out for wild cards

These are those random events that can come flying at us and upset the apple cart. These can be wars, financial events, or even ebola.

Two examples were 9/11 and the sub-prime real estate crash and bank meltdown in 2008. And that’s why you have to stay alert no matter what’s going on.

Currently, there are many wild cards hanging overhead…ISIS, the war in the Middle East, Russia, Hong Kong, the $200 trillion derivatives market, and more. This brings us to our next tip, which is…

• Don’t worry too much 

This may seem strange after we just talked about the wild cards. Nevertheless, don’t let all the gloom and doomers scare you to death. Sure, there are serious problems in the world today. Everyone agrees on that but try not to let fear dictate your actions.

The collapse of Western civilization is not going to happen tomorrow. So don’t worry. We’ve been hearing these predictions since the 1970s, yet here we are. Of course, accidents can happen but we also know that the governments are doing all they can to avoid this.

It may not work but if a collapse is coming we’ll have some warning signs and we’ll take action as needed. So, that pretty much sums it up. These reminders are good for all of us during these volatile and uncertain times.

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