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Beware of Investing When Illusion Replaces Reality

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http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality

Beware of Investing When Illusion Replaces Reality

The stock market just keeps going higher. The voices of contrarians are being drowned by a chorus of analysts predicting endless growth. Does this sound familiar? If you were paying attention in the late 1990s you heard about how the stock market was now different and that old rules did not apply. Of course then the dot com bubble led to the dot com crash and a lot of money was lost. You would need be more than 100 years old to have been an investor when the market crashed in 1929 but there was the same unbridled optimism running up to the crash that ushered in the Great Depression. Seeking Alpha writes that stocks are in a 1929 style bubble and they quote the famous economist John Kenneth Galbraith from his book The Great Crash 1929.

The pages that follow tell of the greatest cycle of speculative boom and collapse in modern times – since, in fact, the South Sea Bubble. There is merit in keeping alive the memory of those days. For it is neither public regulation nor the improving moral tone of corporate promoters, brokers, customer’s men, market operators, bankers, and mutual fund managers which prevents these recurrent outbreaks and their aftermath. It is the recollection of how, on some past occasion, illusion replaced reality and people got rimmed.”

The basics of stock value do not change. In the short term a rising market will support lower P/E ratios due the expectation of growth. But growth never lasts forever and at some point those with profits will sell. Because the market is often a matter of follow the leader successive investors take profits as they begin to doubt the likelihood of continued growth. Just as the prophecy of unending growth begets a rising market the prophecy of lower growth compounded by big position sellers causes the market to correct or even crash. Beware of investing when illusion replaces reality.

What Should You Do?

Over the long term greed is a profit killer. Investors hang on in hopes of getting the last penny of profits out of a rising stock. The most successful long term investors like Warren Buffett are not market timers. They look at the big picture and buy or sell accordingly. If you have made money on the market rally it may be time to diversify your holdings. Diversify your investment portfolio.

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Beware of Investing When Illusion Replaces Reality

  1. 1. B y w w w. F o r e x C o n s p i r a c y R e p o r t . c o m BEWARE OF INVESTING WHEN ILLUSION REPLACES REALITY
  2. 2. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The stock market just keeps going higher.
  3. 3. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The voices of contrarians are being drowned by a chorus of analysts predicting endless growth.
  4. 4. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Click the links below to get your FREE training materials. Free Weekly Investing Webinars Don’t miss these free training events! http://www.profitableinvestingtips.com/free-webinar Forex Conspiracy Report Read every word of this report! http://www.forexconspiracyreport.com Get 12 Free Japanese Candlestick Videos Includes training for all 12 major candlestick signals. http://www.candlestickforums.com Before We Continue…
  5. 5. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Does this sound familiar? If you were paying attention in the late 1990s you heard about how the stock market was now different and that old rules did not apply.
  6. 6. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Of course then the dot com bubble led to the dot com crash and a lot of money was lost.
  7. 7. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality You would need be more than 100 years old to have been an investor when the market crashed in 1929
  8. 8. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality but there was the same unbridled optimism running up to the crash that ushered in the Great Depression.
  9. 9. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Seeking Alphawrites that stocks are in a 1929 style bubble and they quote the famous economist John Kenneth Galbraith from his book The Great Crash 1929.
  10. 10. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The pages that follow tell of the greatest cycle of speculative boom and collapse in modern times – since, in fact, the South Sea Bubble.
  11. 11. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality There is merit in keeping alive the memory of those days.
  12. 12. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality For it is neither public regulation nor the improving moral tone of corporate promoters, brokers, customer’s men
  13. 13. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality market operators, bankers, and mutual fund managers which prevents these recurrent outbreaks and their aftermath.
  14. 14. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality It is the recollection of how, on some past occasion, illusion replaced reality and people got rimmed.”
  15. 15. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The basics of stock value do not change.
  16. 16. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality In the short term a rising market will support lower P/E ratios due the expectation of growth.
  17. 17. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality But growth never lasts forever and at some point those with profits will sell.
  18. 18. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Because the market is often a matter of follow the leader successive investors take profits as they begin to doubt the likelihood of continued growth.
  19. 19. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Just as the prophecy of unending growth begets a rising market the prophecy of lower growth compounded by big position sellers causes the market to correct or even crash.
  20. 20. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Beware of investing when illusion replaces reality.
  21. 21. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality What Should You Do?
  22. 22. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Over the long term greed is a profit killer.
  23. 23. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Investors hang on in hopes of getting the last penny of profits out of a rising stock.
  24. 24. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The most successful long term investors like Warren Buffett are not market timers.
  25. 25. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality They look at the big picture and buy or sell accordingly.
  26. 26. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality If you have made money on the market rally it may be time to diversify your holdings. Diversify your investment portfolio.
  27. 27. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Diversification is a means of reducing risk and increasing opportunity in investing.
  28. 28. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The chances of having a stock in your portfolio rise significantly in price goes up when you have five well-chosen stocks instead of one.
  29. 29. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality The chances of losing all of your investment capital also go down when you diversify your investment portfolio among several stocks in several market sectors.
  30. 30. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Likewise, if a part of your investments is in property, a part is in stocks, a part is in bonds, and a part is in offshore investments you can reduce risk and increase the opportunity for profits.
  31. 31. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality This does not mean you need to sell all of your high tech winners but consider selling some of that part of your portfolio and holding cash
  32. 32. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality rolling a part into consumer stocks or even looking to European stocks.
  33. 33. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Options Are an Option
  34. 34. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality If you really believe that the high tech FANG stocks you hold will keep going up you can always keep them but buy put options.
  35. 35. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality This way you hold the stock and gain in the event of a continued rally and also preserve your gains if the stock suddenly corrects or crashes.
  36. 36. http://profitableinvestingtips.com/stock-investing/beware-of-investing-when-illusion-replaces-reality Beware of investing when illusion replaces reality and make plans for protecting your investments.

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