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Originally Posted by suomynona  I agree.
But I think the best way to maximize the likelihood of making profit is not to look for a bottom because you'll certainly miss it. Big investors will know before you and before you buy, the price would have gone up significantly.
Here's the interesting question: do you think current levels are good enough for a 2-3 year investment? i.e. if one is willing to tolerate temporary losses (lets say a 2-3 year investment with losses over the first year where of course you keep the stocks).
What is happening is a cycle and sooner or later recovery will happen. |
Large-cap stocks are tough to profit from over a short time horizon. The markets are very efficient and you would need to have access to lots of information and analysis to have some kind of advantage. I think they are more appropriate for investments that are longer-term than yours.
I think you should ask first what is your style of investing, e.g. do you have a top-down approach (look for sectors which are going to perform well) or bottom-up (look for undervalued individual securities). You seem to be focusing on large-cap US financial services equities. If you have expertise in that sector and believe you can outsmart the market, then OK.
Normally, financial services companies are good investments in the slowdown/recession phase, but this time around I think there is an increased risk that is not worth taking. Other sectors that do well in recessions include pharmaceuticals, tobacco, etc. These can present good opportunities now. Also in theory, if you want to play the economic cycle, then you probably should be moving out of equities and into bonds right now.
US Stock Market -
17th August 2007
