Good Market – Bad Market

It’s all in your head!

I hear many comments about the market being a bad market and people are waiting for things to turn around before investing in the market.  The thing we need to realize about the market is that it is never really bad or never really good.  The market is only as good or bad as the investments we have going and the strategy we are employing.  Yes, we could say that the market as a whole has gone down over the last year but that does not make it bad.  We need to get out of the mindset that the market is only good if it is going up.  The key to having success in the market is to take advantage of the situations that are available. 

If the market is going down, does that mean every stock is going down?   No, it means most stocks are going down, not every single stock.  Yes, it might be more difficult to find those stocks going up but there are some.  Even if it were true that every single stock is going down, that doesn’t mean we are resigned to lose money.  We just need to change our strategy from a bullish strategy to a bearish strategy.  Instead of buying call options, you can buy put options.

If a stock is going up, can we only make money by purchasing shares of that stock?  That is one way to make money from a rising stock, but you could also buy shares and then reduce your cost of buying the shares by turning it in to a covered call.  You could also buy call options if you don’t want to spend a lot of money on buying stock and if you want to increase your leverage.   You could also reduce the cost of buying the call options by turning it into a bull call spread.  You could also receive income right a way by doing a naked put.  You could also receive income that would not require as much risk by doing a bull put spread.

The key to taking advantage of the situations that the market presents to us is through education.  The more we learn, the more we realize that there are numerous ways to make money in the market.  If the previous paragraph made no sense to you, that is because you do not understand the strategies mentioned.  If you are willing to invest in the market, then you need to be willing to invest in education.  Education will not come to us on a silver platter.  There is a price to pay.  The price may be in the form of money spent, or by gaining experience, or by devoting time.  You cannot get around that.  At the start of this new year, be willing to invest in education in one form or another.

By: Scott Chandler