Russell 2000 (RUT) just crossed 1,000, the highest point ever for RUT; even surpassing the dot com bubble, the credit bubble and so on. S&P is cruising every day higher. Dow is making all time high almost every day. Nikkei is up almost +80% since Abenomics started spreading its wings in Nov’12. Advisors’ bullish sentiments are hitting and higher. Yields are near or all-time lows.
Everything seems fantastic. Central banks are on Bulls’ side. Nothing can wrong!
Apple (AAPL) was market participants’ darling (even today it is for many). The cracks were starting to surface about a year ago; it continued to make higher high. Everything seemed fantastic. There were price targets for Apple to cross $1,000, Apple was THE market and it was expected to be the first company to cross a trillion dollars market cap in modern history. It was almost impossible to imagine S&P500 making all time high while Apple will be 40% lower!
But here we are, Ouch!
Here are 7 mistakes that I think a trader should avoid, especially in the current markets-
1. Confusing momentum with value:
Facts and Values are still relevant. Even though markets can remain irrational longer than traders can remain solvent, your portfolio doesn’t need to be irrational. If you made those purchases based on appropriate “margin of safety” and the intrinsic values are already recognized in this rally, you need to re-evaluate your holding and financial assumptions behind those. Is it still offering a margin of safety? Will you make a new purchase at this price?
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