Rules for the Stock Market Roller Coaster
I never was a big fan of the roller coaster at theme parks. I didn’t mind going uphill, but I wasn’t too crazy about the ride back down. One roller coaster ride per trip to Great America was enough for me. I preferred the Wisconsin Dell’s Noah’s Ark water park far more, especially the lazy river. I like to drift, not to be screaming in fear.
The stock market roller coaster, however, is more to my liking. Of course, I like the upward climbs of stock prices, but I also have a special liking for the deep dives as well. You can be prepared for market corrections. Because I have experienced more than one serious bear market or serious correction during my years of investing, I remember some important rules. It is hard to convince new investors that bear markets are good, because they can seem stomach-churning. However, remembering a few important things when the market goes down is a key to long-term success. This week the market was gut-wrenching. I wasn’t complacent and I remembered my investing rules. The rules I follow include:
Resist the urge to buy 100 more shares of any investment when the market is correcting downwards. For example, this week I bought one share-at-a-time for my grandchildren’s UTMA accounts. I purchased shares of DGRO, VEU and even some of MAIN. I was also buying smaller bites of shares of companies that I already own. For example, I bought small lots of WHF, UNM, PMT, VEU, T, ANTM, HBAN, HPE, SCS, TRTN, CFG and APLE.
Of the six points above, I like to take advantage of number five. Last year I was able to move some beaten-down investments to my ROTH, where they have recovered nicely. Now those wonderful, growing dividends are providing tax-free income for life. The down market is my friend. (The down roller coaster is not.)
Know Your Flocks & Herds 
Why buy smaller chunks? Why not get large amounts of shares at lower prices. This question must be understood as coming from an amateur investor who check balances once in a while.
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If the trend of the market is downward, you don’t know when the trend can reverse. Therefore, in my opinion, it is better to buy smaller amounts on the way down. Of course, you could guess right by buying a large number of shares on the last day of the market or stock’s decline, but that would make you a prophet and genius. Anyone who claims to know the bottom isn’t being honest.
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Also, could you explain the movement of battered stocks into a 401k for recovery?
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I am not aware of any way to move a battered stock into a 401(k). If you have a traditional 401(k) and you want to move something from that employer account to a ROTH 401(k) your employer might be able to do that. I’ve never heard of any employer who would provide that option.
That is one reason that I converted my 401(k) accounts to my own IRA each time I left a company. That gave me much more flexibility to buy/sell and transfer from the IRA to the Roth.
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