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.)