SIX RULES FOR INVESTING IN A CRISIS MARKET

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 Rule #1: Never try to call the bottom

It’s OK if you buy something and then it goes down more. Just don’t use what’s called “leverage” (i.e., borrow. In this case, you can go broke).

Rule #2: While some say, “Buy when there is blood in the streets,” I don’t like to do that

It’s OK to wait until there is some decent data out there, like stabilizing cases in the U.S., etc.

Rule #3: Don’t fight the Fed

The Fed always wins. Always.

Rule #4. Look at what’s changing: drones, robotics, oil, delivery, etc.

There are probably opportunities here that nobody realizes yet.

Rule #5: The 3% rule

If you are buying stocks (as opposed to mutual funds or ETFs), never put more than 2–3% of your portfolio into any one investment.

Being able to sleep at night is core to investing. If I am too dependent on one stock, then I have trouble sleeping.

Warren Buffett would disagree. He made a ton of his money when, in 1962, he put 1/3 of his hedge fund into American Express while everyone else thought Amex might go bankrupt.

BUT… he did his research. And he’s Warren Buffett.

Rule #6: Risk over return

Manage risk over return. If you take huge risks, you won’t think straight.

  • Don’t get leveraged
  • Know when you plan to get out of a stock that’s going down as well as going up
  • Use a “story stop,” not a price stop. Get out when the story changes
  • I don’t just buy something because it’s down. Look for things that have a variety of reasons for upside potential and a variety of reasons why downside is limited
  • Do your own research.

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