Getting Scared About the Markets? Here's What to Do...
By Dr. Steve Sjuggerud
November 21, 2007
My friends and neighbors are getting scared...
Stocks are down. Real estate is down. And instead of things getting better, it "feels" like things are accelerating downward.
So they're worried.
We've been worried before... On March 20, 2003, the U.S. invaded Iraq. In the preceding years, the dot-com bubble had burst in stocks and the Twin Towers were hit. Investors were extremely uncertain about the future.
Do you remember what happened in the stock market? Stocks rose nearly 40% from March 2003 to March 2004...
We had extreme fear and uncertainty in the markets back in March 2003. Smart investors recognized it, and capitalized on it. And how about last summer? Investors were as bearish on stocks as they had been in decades, and the stock market as a whole rose 14% in less than six months... an enormous gain in such a short time.
Today, investors are worried. I checked in with my friend Jason Goepfert, who tracks investor sentiment. Jason says his current indicators are as lopsided as they've been in the past few years. A quick rundown of his more than 100 indicators shows that 26 of them are in the "bullish" range, but only two are "bearish." (Generally for Jason's indicators, fear is bullish.)
I am not suggesting that times aren't tough... I see that they are. Times are tough for housing. But they will get less bad some day. And times are tough for banks. But they will get less bad some day. And when those days come, investors who were bold enough to buy when everyone was scared will make a lot of money. (I've been a little early in these calls, I know.)
Times like these are when you can set yourself up to make hundreds of percent returns. It's not often sentiment gets this unanimously negative in the markets. Again, everyone is scared.
Smart traders are the bold ones who are willing to go against the crowd. They know that when we reach an extreme consensus opinion like this, the "low-risk" trade is to actually do the opposite of what the crowd is doing. It feels uncomfortable, but it's the right thing to do. Now – or very close to now – is one of those times that smart traders make big fortunes in short periods of time.
Are you bold enough to go against the crowd?
Being scared about the markets is typical. Having the courage to fight back your fears and buy at dirt-cheap prices is exceptional.
Do you want your investing to be typical or exceptional?
Investors are nearly unanimously scared. It's time to find where they're most afraid... and put a few chips there. In a few years, I expect they'll return you many times your investment.
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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