You know the expression “If it walks like a duck, and quacks like a duck, it’s a duck” right?
Well, this market sure seems to be walking and growling like a bear more and more with each passing day.
It’s not 100% confirmed yet. That doesn’t mean every stock in the world is going to go down. And there’s always a chance the dip buyers will show up again, policymakers will come up with some new rescue plan to save the financial markets, yadda, yadda, yadda.
But there’s enough troubling action out there that I feel I have to repeat some advice that I last doled out aggressively in the mid-2000s:
SELL is NOT a four-letter word!
I’m not trying to be glib here. I’m being dead serious. Selling has become a lost art form for all too many investors thanks to the nine-plus-year bull market. The vast ocean of funny money created by the world’s central bankers washed away a lot of investor sins. It helped paper over bad investment decisions, carrying even lousy stocks along for the ride higher.
But in a BEAR market, that kind of behavior will kill your portfolio! Not only will your good stocks go up less, or maybe even decline. But, your bad stocks will get absolutely crushed.
So, I urge you to start a project right now. As in today.
“Scrub” your entire investment portfolio using our Weiss Ratings data. Look up the Ratings for every stock, every mutual fund, and every ETF you own at the website, http://www.weissratings.com. If an investment is in SELL territory, and it’s costing you money, get rid of it. There’s no reason to keep lugging the dead weight around.
The only exceptions would be very specific “story” stocks that analysts or editors you really, really trust have made a strong case for, or inverse ETFs and bearish funds.
Many of those inverse plays dropped into SELL territory due to negative price momentum driven by the bull market. But if we’re transitioning from a bull market to a bear market … something that looks increasingly likely to me … that’ll change fast. You’ll need the downside protection inverse funds provide.
So, what are you waiting for? Start throwing the junk overboard — before it drags your portfolio down to Davy Jones’ Locker!
Until next time,