COCKTAIL RECIPE - Looking for The Stock Market Bottom
After several sessions of the extreme volatility of U.S. stocks markets this last week, we have to ask ourselves if the market bottom was previous Thursday, March 12th, at 2,480 for the S&P 500 market index.
When will we find a support level for this market? Are we there already? What it needs to happen to find a light at the end of the tunnel?. These are the million-dollar questions for all investors.
The short answer, respectable financial professionals, will agree on, it is that no one knows with certainty. Instead of guessing whether or not it is the lowest index value, we must focus our energy on what we can observe, understand, and act. It is a pointless endeavor to try to guess the lowest level for the index.
The right set of questions that we might have reasonable answers would be, What would be the appropriate index level that will motivate us to act? And given the available market price levels, market risks, and our willingness to accept them, we may decide How much might we commit to investing at that level?
Those particular questions do have reasonable answers, and they depend on the investor's inner propensity to risk, and not on the market itself.
What we should do it is create our cocktail recipe, where we evaluate our acceptable risks and rewards for your money. This unique mix of ingredients we choose is at our taste. Why? Only when the balance of flavors is right for you, you will remain committed and follow the recipe over and over again.
If you know your acceptable mix of risks and rewards, and with the help of a professional adviser, you will quickly decide when the market has reached its reasonable bottom for you. If the market goes below those personal limits, then you might invest even more.
As in every cocktail recipe, there are appropriate investment principles and rules you should follow to have the right plan, the consistency application, and the right amount of patience.
Your financial adviser will be able to create your investment recipe.