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Methods and the Market

Methods and the Market

I’ve been reading in the news about the stock market, and things are looking… well, not too good, right? That got me thinking about how I’ll invest when I graduate. I want to invest and save money for retirement, but the idea of seeing all my hard-earned cash evaporate in a big dip like this seems unpleasant, to say the least. What kind of strategies can I use to see a recession coming and get out of the market in time? I know that everyone must want to do this, but what do the big finance guys do to make sure they get out in time? They must manage it somehow, right?

Not necessarily! In fact, studies show that even the pros have an awful hard time “beating the market” when they get creative. Picking individual stocks and attempting to “time the market” by jumping out just before the next big crash can be a dangerous game.

Still, there are tactics that investors use to try to accomplish this difficult task. Many big investment firms now use computers and algorithms in their advanced techniques, hoping that their complex calculations are exact enough to give them an edge over the market as a whole.

Many investors view the economy as a series of cycles and attempt to identify indicators that can help determine if the economy is in “early cycle” (and due to keep growing) or “late cycle” (the crash is imminent). Trading Strategy Guides’ RSI trading strategy is an example of this kind of thinking.

Managing to beat the market is certainly an exciting thing, and while it can be tough, we won’t tell you it’s impossible. Still, you don’t necessarily need to use these tricky tactics to save money and grow wealth. As a young investor, you’re sure to see a few market dips in your time--but, if history is any guide, you’ll still see overall growth. With these assumptions in mind, many experts recommend a strategy of steady and diverse investments across the market and in all sorts of economic times. In this view, it’s better to “be” the market than to beat it; while you’ll lose value in dips, your steady investments during this time will be in a discounted market, setting you up for more gains as the economy recovers. It’s a simpler vision of investing, and one that work well enough for most non-professionals.

“Know what you own, and know why you own it.” -- Peter Lynch

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