Investing in a Topping Market

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Every investor knows that our bull market is in the late stage. However this late stage can last for years, if not several months. Everyone now is concerned exactly when will the end time of current bull market come.

Experienced investors will know that bear market would not come suddenly out of no way. There are signs and indications before it arrives. There would be moment of struggle between the bull and the bear. This period of struggle is called market topping. It is a period between the bull peak and the confirmation point of the bear travel. One of the obvious signs is the failure to make higher heights. Instead, lower lows would become the obvious new trend and direction.

All major US markets have created higher heights before the October big fall lately. Therefore most analysts see this as a healthy and much needed market correction.  Market top has not arrived as yet.

However, currently no one really knows for sure whether the current market trend can recover and create another higher height after such a large recent fall.  If the trend remains down and trending for lower lows, this will not be a good sign for active investors. All will be trapped and loses will be painful.

Market Topping
No one really knows for sure whether current market can recover its bullish trend or reaching its market topping

In order words, we do not really certain whether we are in a market topping or still remain on the way through the Bull Run. We will only know after market has shown itself. However, if the confirmation shows up by then, it will be too late. Big loses will be painful consequences.

Investment Critical Decisions

Currently we are in the midst of the third quarter of US corporate earnings report. Will these corporate earnings satisfy market expectation? It seems critical for market behavior at this point.

Fundamentally speaking, we will be confronted with increasing challenges ahead of us. Aside from the unsolvable trade war between the two largest world economies,   geopolitical tension seems arising on the horizon especially between US and the Middle East. Fed interest rate hike has been already on its steady course of action. Global liquidity is getting tighten up as the time passes. And the high bond interest yield has also emerged to play a part in recent market rout.  All these factors will continue to contribute to market uncertainty and high volatility. Do you have the gut to remain in the equity market exposure?

There are at least three decisions investor can make at this point. However, all decision will come with different scenario and consequences.

First, investor can withdraw totally from the market after the market has resumed its bullish recovery and park all his asset into Fixed Deposit for 2 years. Hopefully after these two years, market outlook will become clearer, and most probably heading towards south by then. If this is true, he will be able to protect himself against the frightening or ugliest black swan, the sudden market down swing or the bull trap.

FD
One of the decisions you can make to protect yourself is to lock up your asset with FD for 2 years

However, this decision is only deserved for those who are willing to lose out opportune cost. If the big decadal bear doesn’t appear after 2 years, he must be willing to extent for another period of waiting time. And most probably he will need to endure the pain of seeing others profiting after the market resumes its bullish uptrend for the final thrust up.

Secondly, he can redeem his asset but park them all into bond fund or money market (referring to those who use Fundsupermart platform). In this way, he will be able to do bottom fishing whenever market crashes happen. In this case, he will not be able to lose out totally but able to gain certain profit instead while waiting for the market down turn to show up.

While this is possible, however, bottom fishing after each market crashes takes entire different skill, mentality and uncountable risk. It is absolutely not an easy task. If it is not done properly, our capital may be thinning out before we can maximize opportunity for the next market run up from the decadal big bear bottom.

Keeping Invested

Thirdly, some might think that the current bull market would still have much more head room to run up.  He would choose to remain invested. In this case, he has to be aware that investing in high volatile market is not easy to earn income.  Market will prompt to have large drop unexpectedly. And end time news, prediction and doom prophecies will appear after each market crash.   It takes a different heart condition to remain invested in the market.

Nonetheless, if you are right, market does resume its bullish run up, your account will collect additional profits or gains. These profits or gains can be thrilling and fulfilling. While it is so, please be aware of falsified self-confidence.  This sense of thrilling and fulfillment can make a person complacent.   He will refuse to face reality when the big bear appears. At the end, loses can be painful and regrettable for years.

In conclusion, the good news is there is no perfect decision. Everyone makes decision based on his investment personality and philosophy. There is perfectly no right or wrong decision. As long as a person feels fine, it will be right for him alone.

Anyway, investment is dealing with individual alone confronting the stock market. There isn’t any third party will be involved. The most important thing for investment is not only making profit, but also getting to know and understand individual investment personality and style.

Thank you for reading and happy investing but invest safely!

 

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RISK WARNINGS

The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions.  This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to make up individual investment decision.

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