Ignore the naysayers saying that now we’re in a bear stock market. They’re the same ones that said we were in a new bullish era in late 2021. They were wrong then, and, with the market now down 20%, they’re repeating the same mistake – looking at past results to forecast the future.
Stick to the advice, “Buy low and sell high.” Just remember that doing so requires courage and contrarian thinking at both ends of the scale. That’s because the overriding mood is exciting at the top and depressing at the bottom.
So, November-December 2021 was the optimistic top – the time to sell. June 2022 is likely the pessimistic bottom – the time to buy (or hold if already invested).
‘What about the continuing market selloffs?’
The stock market is going through a significant change that happens after every major bear market. The last bull market’s ideas, beliefs and strategies are being cast away. In their place are coming new bull market drivers, although they are not immediately obvious. Hence, the choppy period with bouts of selloffs.
Monday (June 13) was a good example, with virtually all stocks dropping, including the supposed “winners to own in an inflationary period.” When investors have had enough, they simply want out – particularly when they are told that the stock market looks terrible.
Meanwhile, experienced investment managers, backed by their analytical staffs, are taking advantage of the “sell everything” days to buy. They are building positions in attractive stocks that offer higher return potential ahead.
What are they buying? We don’t know yet. At such times, it’s difficult to determine how things will shake out and what will become the new, popular leading stocks.
One proven way to participate in the new trends is to buy actively managed mutual funds. Here, for example, are the four I discussed in “A Very Different Bull Stock Market Is At Hand – How To Adjust.”
- Vanguard Windsor Fund (value fund)
- Vanguard Growth & Income Fund (growth and value blend)
- Vanguard Explorer Fund (specialty growth fund)
- Fidelity Focused Stock (specialty growth fund)
Each Vanguard fund is multi-managed by independent investment management firms chosen by Vanguard. The reason for using multiple managers is that each has a different investment approach. Combined, they can capture the new bull market’s many components. Additionally, they provide diversification that helps control the fund’s risk.
Fidelity has a history of pursuing higher return potential. The chosen fund has two desirable characteristics: A concentrated design that lets the manager focus on top opportunities, and a smaller size that allows for timely trades.
The bottom line: Feel bad? Be bullish
Okay, it’s not that simple, but that link conveys investing reality. Bear markets and investor pessimism go hand in hand. And people don’t like to jump in and buy when they feel bad – especially when there is a recession coming.
But, is there really a recession ahead? Or is that just the naysayers piling it on? There’s actually a good argument for a bull market coming first. (See “Recession Ahead – Right After This New Bull Stock Market“)