Gottfried, on bear markets...
I printed out the Vanguard article (10 pages) when you originally posted it. I haven't had a chance to review it in detail, but I have scanned it.
Let me just post a few of my personal opinions about bear markets and related issues. Each of these are subject to criticism, and I'm certainly open to changing my mind on any of the following points...
1. Holding on to one's market gains is as difficult as making the gains in the first place.
2. By the time a bear market is identifiable - it's far too late to have made an effective response.
3. I see nothing now that would indicate a looming bear market - which is precisely a good reason to suspect one might be coming.
4. Stock price action is what counts - not the economy or corporate fundamentals.
5. People (enmasse) are capable of doing most anything to a stock's market price, regardless of the fundamentals.
6. The concept of a "perfect market", in which the value of a stock is accurately reflected in the market price, is my operating assumption. I see no convincing evidence to the contrary.
7. I don't care whether the market is a bull market or a bear market, because I'm not a long-term investor. I'm a trader. I'm just as comfortable going short as going long. To somewhat protect against a potential catastrophic event "spazzing out the market", I try to generally maintain a balance betwee my short positions and long positions. In other words, I think it's just as important to look for stocks to sell short, as to look for stocks to go long.
8. According to the article, a short time horizon is less than five years. My definition of a short time horizon is about the same amout of time as it takes me to blink my eyes. Anything longer is long term to me.
9. I'm not sure the article addressed the time value of money, and opportunity costs while supposedly waiting out a bear market. If so, I missed it.
10. As you can tell, as a trader, my genetic make-up is geared to be nimble and quick. If the market crashes tomorrow, at least I have a bit of hope - as an example - that my current short position on WTT might offset any loses on my long position in ESV.
11. It is entirely conceivable, that in today's electronic information age, the concept of "long-term" investing in stocks is out of date.
12.. It is also entirely conceivable, that I'm wrong about any or all of the above.
- - Just my impressions relative to the article you posted.
Thanks,
Ice
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