Want to Be a Successful Investor? Just Use Common Sense

What Happened?

Stocks are high…

Must be time to sell…

But wait! Haven’t we heard this all before?

Such as earlier this year… last year… the year before… and the year before that.

And don’t be surprised if you hear it again in the New Year and the end of next year.

What’s an investor to do when confronted with such news?

Why it Matters

The story comes from Bloomberg News, where it reports:

‘A rally that drove stocks to a series of all-time highs showed signs of exhaustion, with investors awaiting this week’s key jobs data and Jerome Powell’s remarks for clues on whether the Federal Reserve will cut rates in December. Bonds and the dollar barely budged.’

Let’s be honest. Stories like that are mostly meaningless.

Professional investors are always waiting for data.

The thing is, they never have to wait long. Every day data comes from somewhere that will move the market.

Sometimes it’s data that pushes the market up. Sometimes it’s data that pushes the market down. Other times it’s data that causes the market to do nothing at all.

Here’s the problem.

Stories like that often cause investors to unnecessarily panic and sell stocks, when in reality, short-term pullbacks like that are often good times to top-up a stock portfolio.

How it Affects You

Of course, that doesn’t mean to say stocks won’t go through a sustained fall at some point.

That always happens.

But trying to time those events isn’t easy. Not impossible… but not easy.

For most investors, the best way of dealing with market ups and downs is make sure you’re regularly taking profits, cutting losers, and making sure you never have more in stocks than you can reasonably afford to lose.

That’s important after such a strong run. By now, you should have some good profits built up. Go ahead and take some of that out of the market.

If you keep doing that at regular intervals, sure you may not make as much as if you’d kept hold of your entire position, but it also means you won’t panic and make big losses when the market does fall.

Investing really is just using common sense.