How to Avoid Getting Slaughtered
There’s an old adage on Wall Street that “Bulls make money, bears make money, pigs get slaughtered”. In this last part of our three-part series, we’ll answer the question “How do I avoid getting slaughtered?”. The first part of the series told you what is a bull market and what is a bear market.
What is a “pig” on Wall Street?
After the market has been going up for several years, it’s easy to get greedy and just want more and more. Investors who put greed ahead of sound investing strategies and principles are called “pigs”.
How do I know if I’m being a pig?
If you are making good money in the stock market but still aren’t satisfied, or if you take more risk in an effort to make ultra-high returns, then you may be acting like a pig. Abandoning a sound investment strategy and instead acting upon a “hot tip” is a sure sign of being a pig.
How do I avoid getting slaughtered?
That’s easy…don’t act like a pig! Don’t be too greedy. Don’t follow hot tips. Don’t borrow money to make stock market investments. Above all, stay disciplined and stick to your investment plan. Smart investors are disciplined and know when it’s time to take some profits. A great way to maintain discipline in your portfolio is a technique called “portfolio rebalancing”. We’ll discuss how you can use portfolio rebalancing in our next blog entry.