What are you doing when the market dips?

So for everyone who’s been keeping an eye on the markets recently, there’s been bit of a dip across everywhere. During this time, I’m wondering what resources and references have you guys found insightful?

I read this blog post from MyWallSt and found the advice useful. I’m taking a look at my holdings and if the nothing has changed with the fundamentals I’m thinking about lowering my dollar cost average.

Looking forward to seeing what you all have to share

Same here , buying the dip SPUS < 30 , you got to love that, buy the dip , pray the tahajud ultimate plan

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Salaam,

Hahaha, loved this, brother Osama! Buy the dip and pray Tahajjud :smiley:

Here are some things I’ve found useful

  1. First of all, sit tight and don’t touch my investments (e.g. Intuitive Surgical, Abiomed, Nvidia, Uber, Salesforce) because I know they’re inherently strong stocks that will bounce back

  2. Follow the Motley Fool Money podcast to spot bargains and buy they ASAP

  3. I find Brian Feroldi’s Twitter posts on investing very insightful

Would love to know others’ thoughts on this as well :slight_smile:

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The market trend has historically been upwards, so I believe it’s best not to be bearish and instead hold steady or buy.

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My approach has been to rebalance between sukuk and equities as the market goes down. I won’t accept a guaranteed loss of 6%+ a year of keeping anything significant in cash.

If you are doing regular investing (DCA), if anything you should increase it while the market is going down or otherwise leave as is, assuming you are secured in your near term (saved well, rainy day fund, etc). If you didn’t save enough and therefore need to hold back investing in a downturn, that’s okay… better than selling. But aim to be in a position in the future where if things went down you could keep buying the same or better yet buy more by rebalancing out of sukuk/cash savings. That’s my thoughts anyway.

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I was already around 1/3 into commodity stocks coming into this dip so just exiting a little more from normal stocks and redeploying partially into commodities, and then looking into REITS and possibly gold. i.e. making sure I’m diversified and following some macro themes.

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Jazakullah , im in nvidia its gone from 220 to 240 love the stock

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Wa Iyakum brother. Indeed. Nvidia looks like a killer investment, InshAllah :slight_smile:

You can also take a look at these other stocks that are on my radar. See if any of them take your fancy.

Warm regards

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Assalam o Alaikum Brothers,

We all hear and hearing more recently about the Market going down sometime in coming months. No one can point when and how much but this aspect also serves all of us to review our investments.

Can you advise the the sectors or halal companies/funds where we can diversify or hedge onto so that we have coverage against any downturn and avoid any losses from being over invested in popular sectors ( for e.g. tech or EVs and similar).

I feel avoiding losses is as important as striving for profits.

JAK

Cash is the only hedge, other than very specific investing strategies that work in bear markets where you need specific expertise and experience.

Normally one could hold bonds and hope they would offset a stocks downturn, but unfortunately the economic regime is different now and that hedge may not work.

You’re probably thinking “but what about inflation”, my money will be devalued. Yes that’s right, but if stocks are doing down then at least cash doesn’t go down. I’ve been 35%+ cash for several months now, and nearly 50% cash now.

The way I think about investing this year is to target smaller gains than in a normal year and just accept it.

You can’t reliably avoid losses as you probably know. You will lose to inflation if nothing else. The point is to make the gains exceed the losses over the long term. You don’t need anything but time and patience to all but guarantee it.

Aoa,
I see your point on Cash and seems to be better balance for the current environment. Besides the companies Br Kashif has mentioned with zero debt, are there other companies that you have looked and can recommend to invest.
In US lot of Islamic Mutual Funds are tech heavy, what are your thoughts on following the companies from those funds?

Ws, personally I am not recommending any companies.

However I do have a thread here which shares what I’m investing in…so feel free to follow it and get notifications…it is +20% so far this year and since start of 2021 it is +75%. Feel free to look at those for inspiration and ask questions about them as potential investments. And please note the cash allocation I’ve been and still am holding, i.e. it’s pretty high.

Regarding tech, I have zero track record in successfully making money in the big tech stocks, so I don’t invest in them. Tech has it’s pros and cons. On the pro side, some are great companies. On the con side, if interest rates rise even a little, then in isolation logically this will push the prices of the big tech stocks down as people will move money into bonds. Like I say…I don’t know!

I personally just use the Islamic funds, because I don’t think I can do a better job.

I disagree with keeping a large portion of cash because the market has been trending down, market sentiment, news, etc. Historically the peak time people hoarded cash was near market bottoms, and vice versa.

The issue is if you succeeded in market timing you can never be sure if it is because of some clever insight you have or if it is blind luck (we don’t call it luck but call it naseeb). So someone could be blinded to think they can outsmart the market only to be burned by it when they take even bigger market timing gambles and it doesn’t work out, wiping out any advantage they built up till then.

As for cash not going down, actually we need to fix this perspective and see that it is going down with inflation. If we saw it this way we would be less inclined to overdo keeping cash vs keeping money invested and hanging on for the roller coaster ride.

Who foresaw Covid would happen the year it happened, or that Russia would do what it did this year? And who knew that Covid wasn’t going to kill 10x more people and get much worse such that the market wouldn’t have fallen well below the Mar 2020 low instead of recovering so quickly and strongly? I know some people who cashed out then, some completely and others partially. Their cash is now worth 15%+ less and they’re still waiting for the “right time” to get back in.

Here is a list of assets that should do well during a bear market (or at least not correlate with stocks) according to conventional wisdom, and their respective YTD performance.

Gold: -8%
TIPS bonds: -14%
AGG bonds: -13%
TLT 20 Plus Year Treasury Bond: -25%
VNQ REITS: -22%
Bitcoin: -58%

Diversify they said…it’s the only free lunch they said. Buy non-correlating assets they said. Look at the performance over the past 30 years they said…look at all these models and graphs we’ve got they said.

And the ticker of the winner YTD is…drum roll…CASH!

Salam, if you are short term trading, then yes 30 year performance is irrelevant. For a person who cares about 30 year performance, YTD is completely irrelevant. Even 5 years is pretty irrelevant.

I’m making a a different point. I’ve been saying for months that 60:40 stocks:bonds (i.e. conventional wisdom) wont work at the moment and so I’ve been advocating a high cash allocation. Which I’ve reflected in my smallcap picks thread in real time.

The YTD data is important here as it proves me right or wrong, in real time. Not after the event. So far the jury is out…we’ll see as we go along.

And this isn’t about me being right or wrong…am just concerned and so sharing info and the original poster asked “what are you doing when the market dips?”. If people agree great, if not great.

Hey Farhan, great question. I have subscribed to plenty of substacks that offer great insight into Macro and the markets.

Some of my favourites would be MacroAlf, The Morning Hark, and FXMacroGuy

There are twitter users who specifically talk about various commodities. Some great follows in each sector:
oil - Anas Al Hajji, Eric Nutall
Uranium - UraniumInsider, John Quakes
Tin - PamplonaTrader, Respeculator
Fertilizer - Josh Linville
Coal - Matt Werder