no we are not, but we can use the same/similar fundamental approaches as he does. maybe we dont have the bank account as him, but we can all learn and we dont need to sell out at every peak because we think we cannot weather the storm, just have a plan and some guts :)
One of the key strategies of long term investors is a strategy most hated by traders - the principle of cost averaging (i.e. buying more on a downturn). So long term investors would welcome a crash or big correction and will continue to buy more on the dips. Quality stocks, with decent balance sheets and a well diversified portfolio should let you sleep easy in a downturn.
OK ...the above is all very well said. And I agree we are due for a big market correction (a 20%er or so). Practically, what do you do when this starts. My strategy is to wait for the first 5% to drop, then go short with "hedged" CFD's to protect my long term investments. I will do this for tax reasons as I do not want to be smacked 40% marginal tax but rather a 15% CGT. Is my logic incorrect?
DEP, I think where you err is saying "investors" & "derivatives" in the same breath, traders & derivatives yes. As an investor a market crash is least of my worries, in fact I''m looking forward to it, as it presents "investors" with great buying opportunities, the last one gave me an opportunity to buy shares at bargain prices, eg MPC at 2550 ,OML 625, BIL, SOL and a few others. As a trader, yes I'm very aware of the overheated market, and for that reason stick to CFDs with shares at a reasonable pe and must be dividend paying. Remember markets always over react both ways be it on the upside or down. For long term investors, it would be wise just to keep some cash ready. Must I now go and sell my MPC , SOl, BIL etc because the market is heading for a correction that no one can predict the day it's going to take place, no ways.
Stores, the profit you realize on your short will be taxed at 40%, if that is your tax bracket.Profit is profit , the minute you fiddle with a long term portfolio, SARS will do its utmost to class you a trader, for that reason CFDS& SSFs are great for playing the market, and good quality stocks kept separately in that bottom draw, for you or your family to enjoy the reward of .....patience
@ Rams and Prancing horse. Thanks, and I agree with your tax efficiency comments, but certainly it must be all around position sizing. If I think we in for a big drop and I decide to go short with CFD's as a hedge to protect my long term portfolio, then s