generally speaking…
To my mind, the most important rule for any investor is not to make stupid investments.
The reality is though, that even the best professional investors do things that seem good at the time but turn out in the end to be really stupid. The dividing line between success/survival as a professional and failure/being fired is not determined by avoiding doing a fair measure of dumb things, but rather how big the percentage of the portfolio dedicated to stupidity turns out to be and one’s diligence in working out which holdings are clunkers and replacing them with something not as dumb.
A second is not letting scary times, like the one we’re in now, get you so emotionally out of balance that you do extra-strength stupid things, i.e., stuff that will give you emotional satisfaction for the moment but which will not look that great in calmer waters.
Given that in scary times people tend to do extra-stupid things, a reasonable first rule is to do nothing. Take a walk, go to the gym, read a bunch of 10-Ks …but don’t dump out the crown jewels of the portfolio simply because they’re going down.
Perhaps oddly, but I think it makes a lot of sense, this is a good market for upgrading your portfolio by getting rid of the clunkers that are hiding in plain sight–the holdings that have never gone up–and replace them with stocks that are former (and future) stars that are now falling through the floor. A simple screen would be stocks that haven’t gone up at all in the past year–and which are now starring on Wall Street by not going down.
the biggest imponderable
In more normal times, I’d assess what’s happening in the stock market now as a typical correction in an ongoing, gently rising, bull market.
Another strong possibility is that, putting culture wars to the side and looking solely at the professed economic agenda of the current administration, the stock market is beginning to work out that its plans to: shrink the labor force, raise domestic prices and deemphasize teaching children skills that will make them more valuable workers, is a recipe for economic stagnation. Personally, I do think this is the administration’s plan, given its (unfounded) belief that its actions won’t have bed consequences. The real issue is whether saner heads will prevail. One can easily read the current market as saying that no one will ride to the rescue.
If the second, the market downturn will likely be longer and deeper than most expect. And multinationals will likely continue to do better than companies whose sole market is the US.