Investing in the New Economy
In his new book, Discover the Upside of Down: Investment Strategies for Volatile Markets, Ron Coby emphasizes his short-side strategies and timely investment tips to navigate market volatility.
“You must have a more proactive strategy as ‘buy-and-hold’ investing doesn’t work in long-term secular bear markets,” says Coby. “As many buy-and-hold investors know, losing 40-50% has been devastating.”
Coby published the “10 Iron Laws of Investing” from his 21 years of investment experience working on Wall Street syndicating private and public financings, managing hedge funds and as the head of his own investment firm. Here are five of the Iron Laws which investors need to know right now:
1. When there is fear and market despair everywhere, buy like there is no tomorrow. Remember the bottom of the 1987 crash, and the bottom of the NASDAQ 2000-2003 crash? These were buying opportunities in disguise! Don’t let fear keep you from buying at the bottom.
2. Have a set of timing indicators to help you buy low and sell high, and always be hedged for downside protection. In 2008, “The Global Margin Call” was created as overvalued assets collapsed and high levels of debt remained. If strict risk disciplines weren’t deployed, investors fell down a slippery slope of hope and learned that long-only is wrong-only in bear markets.
3. Cut your losses short so you never ride a stock all the way to zero. In past market environments, most investors bought a stock, fell in love with it, and watched it go up and down. In today’s volatile market, the strategy of ‘buy and hold’ to “buy and fold” as investors either panic or are forced to sell at the bottom. In today’s volatile market, investors need a more tactical strategy and discover the upside of down markets.
4. Always diversify with large and small common stocks, long and short. Exchange traded funds offer diversification. Choose stocks from all asset classes. Look to non-correlated asset classes to reduce volatility and look for profit opportunities on both sides of any market, long and short.
5. Don’t completely trust anyone’s word on the street. The world will never forget Bernie Madoff and how he ripped off investors in the hugest Ponzi scheme ever. Never trust anyone—do your own research. Even reputable financial planners with good intentions advise buy-and-hold only investment strategies. In 2008, the buy-and-hold investment strategy has left investors full of grief and giant market losses as all stocks crashed in 2008.