How To Protect Your Portfolio During The Equity Market Sell-Off
Posted on October 26, 2018
I appreciate that it has been a busy week again for most of us, so I intend to keep this post brief. What you need to know is that this volatility, like most things in life, will pass. However, in the meantime we as traders and investors need to act appropriately in order to manage risk and maximise positive returns on the other side.
In this week’s Trading Club video I provided a whistle stop tour of exactly how to do this, giving you an accurate and actionable assessment of what's happening in markets right now. From my perspective as a value focused Fund Manager, I am not too concerned by the sell off in equities which appears to be driven by rates causing 'multiple compression’ (lower average PE ratings) rather than a material deterioration in the economy.
Admittedly some of the numbers reported in the current earnings season have been met with disappointment by investors, though I think that it is premature to suggest this as the onset of a recession (or Business Cycle Checklist affirms this - Trading Club members can access this in our Monthly Checklist Report). The bottom line is that if this trend of rising rates / multiple compression continues, value stocks should begin outperform the growth ‘darlings’ of this bull market (of course, equities in general could face headwinds, but on a relative basis value should be the place to be). So how do we find these companies?
Now, by no means is Apple my most exciting ‘value play’, but as a relative safe haven and their $64 billion cash pile (which becomes more valuable as rates rise), companies such as this might well be worth closer inspection. If you want to see how we grade companies as value investors using our 5-Step-Trading® Company Analysis framework (as Lex introduces in our Million Dollar Traders Course) you can see this current market case study in this week’s Trading Club video.
So in short, if you are actively trading or invested in this current market, you need to be prepared. We pride ourselves on the honesty and integrity of our programmes (those may sound like platitudes elsewhere, but you know we really mean it!) and don’t want to see any of you make unnecessary mistakes that will often prove to be costly. Instead, to once again quote the Oracle of Omaha, Warren Buffet, " there is no greater investment than an investment in your own education".
If you are yet to join us and would like to gain access to the most comprehensive investing education around, check out our Courses and Trading Club or send us a message at [email protected]. We’re here to help you!
When the going gets tough, the tough get going.
Enjoy your weekend,
James Helliwell | Chief Investment Strategist
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