Many investors believe that a fiscal cliff “dive” is inevitable.
Even with the prospect of a deal lifting the markets yesterday, I can’t say I disagree.
The blame game has already started and it’s highly unlikely that we’ll see anything other than more foolishness out of Washington. And so far all they have done is kick the can down the road to date.
So what can you do about it? Believe it or not, crises like these can be an ideal time to buy stocks. And gold. And oil. And certain kinds of bonds. And more.
The death of financial markets is almost always highly overrated.
Adding insult to injury, fiscal cliff or not, trying to time the markets is an exceptionally bad idea – 85% of all buy/sell decisions are incorrect, according to Barron’s. Further, Dalbar data shows that the return of an average investor trying to time the market is a pathetic 1.9% per year versus the S&P 500 return of 8.4% over the same time period.
Over 20 years, that’s the financial equivalent of taking a 342% hit in lost performance.
With that in mind, here’s a five-point plan for turning the fiscal cliff into an outstanding opportunity.
1) Get ready to go bargain hunting
With Europe entering another recession and some parts of the world flirting with a protracted slowdown that’s going to be more like a managed depression, things couldn’t be more uncertain.
While I don’t personally like this reality any more than you do, from an investment perspective I’m very happy to pick through the oversold stocks and go bargain hunting.
Because history’s rearview mirrors show that fear, panic, crisis and stress are all classic signs associated with opportunity — and profits.
This is particularly true for choices related to energy, resources and certain kinds of technology – all of which the world needs, as opposed to wants, and all of which are backed by billions of dollars flowing their way whether we go over the fiscal cliff or not.
2) Stress test yourself
Never mind the big banks or Wall Street’s hooligans, take a good hard look in the mirror.
Many investors are completely unprepared for the psychological impact of our nation going over the edge. And you don’t want to be one of them.
….read the rest of 2, 3, 4 & 5 HERE