Ask Colin

What is your plan if the present (8 January 2016) sideways pattern lows are broken?

The detailed question was:

In this week's (8 January 2016) market review you point out that a number of markets including the ASX are poised above lows of late 2015 and we should have a plan as to what we will do if those levels are broken. Can you share if you will do anything other than sell stocks that hit their stops - as according to previous analysis we're still in phase 2 of the bull / bear cycle?

Each of us should have a different investment plan, so the action we take will depend on our plan. My plan is in Building Wealth in the Stock Market.

 

If I thought it was a bear market I would already have reduced my exposure to 30% invested. Instead, I am seeing it as an uptrend, but with the risk of a deeper correction (might even be a mini bear market) within the overall bull trend. As such, I will sell any stocks that hit their stops – as always. I have already done that, taking my exposure down to 75%.

 

The other important issue is that a market decline is not in my mind a great threat. Instead it is going to be an opportunity to buy into stocks that are currently overvalued or even fairly valued, that may become cheaper.

 

I must stress that my investment plan is for me. It should be different to yours, so you need  to know what you will do if the sideways pattern we are in were to fail.

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