Being prepared to bale out....

It's quite difficult to read any financial article without someone telling me that the markets are 'frothy'. In other words, valuations are high and we should be prepared for a market 'correction'. This tends to make for stressful reading and poor decision making.

Photo from bay_dragon on Flickr

Having a pre-formed plan about when to bale out is helpful in these situations. I know that the equity markets have indeed been 'frothy', but they may continue to be, so I do not want to exit from investments that may continue to rise.

To deal with this I have a plan. That is to bale out if the price drops below a certain point (ie to convert to cash). I find it reassuring to have a plan. I know that I will not exit at the very top of the market, trend followers never do, but I plan to exit with a good portion of the profit retained, and not watch it all disappear when the market falls (which, of course, it will do at some point, all markets do).

If you are interested in learning more about my investing style, then do consider becoming a member of my site. 

If you would like to know my thoughts on how the markets are at the end of this week (09 Dec 2107) then watch this brief video:


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