With all of the recent talk about the fiscal cliff, there appears to be a lot of uncertainty about the future of America’s economy. But uncertainty does not mean you should panic… especially when it comes to your portfolio.
In just a little over a month, current tax cuts are set to expire… and major budget cuts are scheduled to go into effect.
According to the pessimists’ predictions, the combination of these two events will send our country into an economic spiral… right off the proverbial “fiscal cliff” at the stroke of midnight as 2013 begins.
As the deadline for the government to figure out what to do approaches, these pessimists are sounding the alarms of impending doom.
The cliff is coming! The cliff is coming!
As the media hypes the worst-case scenarios, some people are getting scared… and some nervous investors are frozen like deer in the headlights. The tempting reaction is to stop trading and prepare for the worst.
Economic fear and panic ensues, and rational responses are thrown out the window.
So, as an investor, what should you do to prepare yourself? What are the appropriate responses for emotionally-charged times like these?
Stay grounded in reality. These media-driven, political “tempests in a teapot” occur almost annually. There are usually excuses for the market-makers on Wall Street to drive stock prices lower.
Remember, since the “Smart Money” can short stocks as well as go long stocks, they’re able to make money whether the stock market goes down or up. Don’t let their trading programs and the mania of the masses distract you and prevent you from making sound investment decisions.
Smart investors who follow time-tested disciplines such as trailing stop-loss tracking and position sizing will have the cash and the buy-limit orders so they can invest when the market is correcting. Like the “Smart Money” crowd, they can buy when everyone is fearful and sell when everyone is greedy.
In reality, when it comes to expiring tax laws, “fiscal cliffs” and political compromises, no one knows for certain what will transpire between now and the end of 2012.
Remember from past crises that last-minute deals usually emerge and “save the day”. Both parties in Congress have a vested interest in getting this fiscally urgent, economically sensitive situation solved.
Even if they don’t reach a compromise before the December 31st deadline, they could put stop-gap measures in place… or take care of business when they reconvene after the holidays.
If you stop investing and abandon your financial strategies because of something that isn’t even likely to happen, you’ll end up losing time and missing a long-awaited opportunity to buy the shares of cash-rich companies at lower prices.
But what if no solutions are reached before the deadline?
Even if that were to occur, it wouldn’t be the immediate catastrophe that people fear; it will be a gradual slide down a slippery economic slope – not a cliff – and it will unfold gradually over months.
Plus, all signs are pointing to America’s economy rebounding to a state of growth, not decline – just look at retail sales, housing, and the accommodative monetary policies of the Federal Reserve (providing the lowest interest rates in history)!
Regardless, you can’t predict the future… and there’s no point in trying to guess how the market will perform more than a month from now… or in letting a potential blip in the future affect how you invest during this auspicious correction in the investment markets.
You can’t base your investment decision on what might or might not happen. When you let guesses or emotions guide your trading decisions, you are putting your faith in irrational and unreliable gut feelings… and you are setting yourself up for financial disaster.
But just for the sake of argument, let’s say the worst-case scenario comes true (unlikely), and stocks take a dive. If you’re playing it smart, you’ll be fine. Why?
Because if you’re a smart investor with unemotional trading disciplines you’ll have safeguards in place to protect your financial assets.
The same safeguards that you should always… ALWAYS… use, no matter what the economy is doing.
Your asset allocation strategy will protect you if the stock market slides. Your diversification plan will protect you if certain sectors correct sharply.
And your exit plan – complete with trailing stops and alerts – will let you know exactly when you had predetermined to cut your losses or protect your gains.
Besides, the market is going to fluctuate throughout your long-term wealth-building plan, so get used to it. If you want to succeed in investing and trading, you’ll consistently have a solid plan in place.
This plan needs to empower you to achieve your goals, no matter what the market does… and you need to have the confidence to stick with it.
You need to have the kind of self-assurance that comes with the knowledge that you have made smart decisions ahead of time… based on the right information… and know exactly what you need to do no matter how irrational the headlines are or how the markets may react.
This keeps you grounded and focused, no matter what the market does. You’re prepared to deal with turmoil and uncertainty because you chose the smart portfolio management tools and disciplines offered by TradeStops.
You’re ahead of the confused crowd and the nervous Nellies!
You want to be a savvy investor who doesn’t panic every time a new potential crisis or threatening headline erupts. Trust your rational disciplines and the reliable, unemotional facts.
Choose to have a plan in place… one based on time-tested strategies and cool-headed logic. That’s where TradeStops comes to your aid and lets you work your plan, limit your losses, and protect your gains.
Remember the old adage; it’s not just what happens or how the headlines read, but how we’ve prepared and chosen to respond that can turn potential crises into rewarding opportunities!
