{"id":222380,"date":"2021-04-09T01:18:00","date_gmt":"2021-04-08T22:18:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/opinion-stocks-short-term-signals-are-bullish-but-peter-lynchs-long-term-investing-advice-still-applies\/"},"modified":"2021-04-09T01:18:00","modified_gmt":"2021-04-08T22:18:00","slug":"opinion-stocks-short-term-signals-are-bullish-but-peter-lynchs-long-term-investing-advice-still-applies","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/opinion-stocks-short-term-signals-are-bullish-but-peter-lynchs-long-term-investing-advice-still-applies\/","title":{"rendered":"#\n  Opinion: Stocks\u2019 short-term signals are bullish but Peter Lynch\u2019s long-term investing advice still applies"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23e9dbad39f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23e9dbad39f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/opinion-stocks-short-term-signals-are-bullish-but-peter-lynchs-long-term-investing-advice-still-applies\/#Legendary_fund_manager_said_to_buy_what_you_know_and_that_matters_in_this_trigger-happy_market\" >Legendary fund manager said to buy what you know and that matters in this trigger-happy market<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/opinion-stocks-short-term-signals-are-bullish-but-peter-lynchs-long-term-investing-advice-still-applies\/#Michael_Sincere\" >Michael Sincere<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Opinion: Stocks\u2019 short-term signals are bullish but Peter Lynch\u2019s long-term investing advice still <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lies<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Legendary_fund_manager_said_to_buy_what_you_know_and_that_matters_in_this_trigger-happy_market\"><\/span>\n  Legendary fund manager said to buy what you know and that matters in this trigger-happy market<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div class=\"cx--next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000225856\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       As a freelance writer and author, I\u2019ve been fortunate to have interviewed many stock-market gurus over the years. One of the most memorable was with the legendary Peter Lynch, the former Fidelity Investments mutual fund manager. Years ago for an article, I spoke to him about one of his favorite subjects: Helping young people learn to invest.\u00a0<\/p>\n<p> <strong>Do your research<\/strong><\/p>\n<div class=\"paywall\">\n       Lynch popularized the idea to invest in what you know \u2014 meaning to own shares of the companies that you are familiar with. He wrote three bestselling books on his ideas, including actually going in person to observe what people were buying first-hand.\u00a0<\/p>\n<p>Lynch was famous for visiting the companies that he wanted to buy stock in. For example, before buying shares in an automobile stock, Lynch would go to the dealer showroom, converse with the salespeople, and check out the inventory.\u00a0<\/p>\n<p>His advice, while sounding simplistic, is actually brilliant. After all, most people spend more time and effort researching buying a new refrigerator than a stock. I made that mistake when I first starting investing, sinking $50,000 into shares of a Texas cell phone company that I had never even heard about. Why? Because an acquaintance who knew more than I did about the stock market said I should. \u201cYou can double your money,\u201d he promised. Famous last words.\u00a0\u00a0<\/p>\n<p>Instead of doubling my money, I lost half of it within months when the company nearly went bankrupt after some questionable accounting maneuvers. It was also the first and last time I ever bought stocks on margin.\u00a0<\/p>\n<p>Using margin, the broker allowed me to use my original $25,000 to buy another $25,000 worth of stock (2-1 margin). When the stock plunged, I not only lost money on my original investment, I also owed the brokerage for the money I borrowed. Mismanaging margin is one of the ways that many investors get into trouble when their stocks go against them.\u00a0<\/p>\n<p><strong>Study balance sheets and stock charts\u00a0<\/strong><\/p>\n<p>Had I followed Lynch\u2019s advice and done some basic research, I would have discovered that the so-called cell phone company was a scam. It was being promoted by fake press releases and inflated posts on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social media<\/a>.\u00a0<\/p>\n<p>In hindsight, I could have flown to Texas and visited the company. I would have discovered that it had only two employees. It would have been a lot cheaper to fly there than lose $25,000.\u00a0I also could have studied the company\u2019s balance sheet, looked at a stock chart, and studied its earnings reports. It sounds like common sense, but think of how many people buy stocks every day without doing the most basic research, what is referred to as exercising \u201cdue diligence.\u201d Others call it \u201cdoing your homework.\u201d\u00a0<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p><strong>How Lynch handled bear markets<\/strong><\/p>\n<p>From my interview with Lynch, I learned that he doesn\u2019t make predictions. \u201cI have no idea what the market will do over the next one or two years,\u201d he told me. \u201cWhat I do know is that if interest rates go up, inflation will go up and in the near term the stock market will go down. I also know that once every 18 months the market has a decline of 10%. These are called corrections. We could easily have a 10% correction. Perhaps one out of three of these corrections turns into a 20% to 25 % correction. These are called bear markets.\u201d<\/p>\n<p>Lynch took market corrections in stride, including bear markets. Although he disliked bear markets since he was a long-only manager and hated losing money when one occurred, he didn\u2019t panic. \u201cIf you understand what companies you own and who their competitors are,\u201d Lynch said, \u201cyou\u2019re in good shape. You don\u2019t panic if the market goes down and the stock goes down. If you don\u2019t understand what you own and don\u2019t understand what a company does and it falls by half, what should you do? If you haven\u2019t done your research, you might as well call a psychic hotline for investment advice.\u201d <\/p>\n<p>I learned from Lynch that although bear markets are inevitable, they cannot be predicted. That is why before one occurs, you must evaluate what stocks or funds you own. If you are confident about your investments, you won\u2019t get shaken out.<\/p>\n<p>For me, it means reducing some of my positions, especially given the U.S. market\u2019s current technical indicators. Although the market has been on a 12-year bull run, it is still vulnerable to a steep correction, or worse, a bear market. That is why it\u2019s more important than ever to do the basic research (i.e. study balance sheets and stock charts).\u00a0<\/p>\n<p>For short-term traders, here are what some solid technical indicators are saying now about the U.S. market as of the April 8 close.<\/p>\n<p><strong>Moving averages:<\/strong> Bullish. The S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"positive\">+0.42%<\/bg-quote><br \/>\n       is on a tear \u2014 well-above its 50-, 100- and 200-day moving averages. According to moving averages, all systems are \u201cgo.\u201d\u00a0<\/p>\n<p><strong>RSI (relative strength indicator): <\/strong>Overbought. RSI, which measures overbought\/oversold conditions, is telling us the market is getting close to the danger zone. When RSI hits 70 or higher, it is a danger sign. By the way, the S&amp;P 500\u2019s weekly RSI is currently at 69.14. Consider this: In less than three weeks (since March 25), the S&amp;P 500 has moved higher by about 250 points.\u00a0The Dow Jones Industrial Average<br \/>\n        DJIA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598065\/realtime\" class=\"positive\">+0.17%<\/bg-quote><br \/>\n       RSI is 70.86, while the Nasdaq<br \/>\n        COMP,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598365\/realtime\" class=\"positive\">+1.03%<\/bg-quote><br \/>\n       is at 63.73.<\/p>\n<p>If the market keeps rising, short-term risks rise. Remember that markets or stocks can remain overbought or oversold for long time periods. For example, right now some individual stocks have RSI levels of 90 or higher, and yet, they are not falling. RSI is best used as a clue, but not to time the market.\u00a0<\/p>\n<p><strong>MACD (Moving average convergence divergence):<\/strong> Neutral. Many short-term traders rely on the MACD to give reliable trading signals. At the moment, while MACD for the S&amp;P 500 is above its zero line (positive), it is also even with its nine-day Signal Line (neutral).\u00a0At the moment, MACD is not giving a clear signal for the S&amp;P 500. Meanwhile, MACD for the Dow is bullish (MACD above zero line and nine-day signal line) and is neutral for the Nasdaq. <\/p>\n<p><strong>VIX (CBOE Volatility Index): <\/strong>Showing no fear. The VIX,<br \/>\n        VIX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598281\/delayed\" class=\"negative\">-1.22%<\/bg-quote><br \/>\n       which measures the implied volatility of the S&amp;P 500, has been falling for months, and is in the basement (it\u2019s currently just under 17.0). This tells us there is low volatility and little fear. Few expect anything bad to happen to the stock market, and if stocks slide, many believe the market \u201cwill come back.\u201d Only Mr. Market knows if this is true.\u00a0<\/p>\n<p>Bottom line: If you are a long-term investor, Lynch\u2019s methods and ideas are excellent. If there is a bear-market hiccup, use the opportunity to buy shares of stock or indexes that you have researched.\u00a0<\/p>\n<p>If you are a short-term trader, there are clear warning signs that the U.S. market is too good to be true. Most importantly, don\u2019t own anything you don\u2019t understand, or that you got from a tip from a neighbor or a tout on TV. And be wary about buying on margin.\u00a0<\/p>\n<p><em>Michael Sincere\u00a0(michaelsincere.com) is the author of \u201cUnderstanding Options,\u201d \u201cUnderstanding Stocks,\u201d and his latest, \u201cMake Money Trading Options,\u201d which introduces simple option strategies to beginners.\u00a0<\/em><\/p>\n<p><strong>More:<\/strong> S&amp;P 500 is now overbought and looks ready to drop in the short term, according to this strategist<\/p>\n<p><strong>Also read:<\/strong><strong> <\/strong>\u2018We\u2019ve reached a tipping point\u2019 on bitcoin adoption, Fidelity\u2019s Tom Jessop says<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Michael Sincere\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Michael_Sincere\"><\/span>Michael Sincere<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<div class=\"mw-author-contributor\">MarketWatch Contributor Network<\/div>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21005575-02D4-D4B5-4572-D37240E90F87%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Opinion: Stocks\u2019 short-term signals are bullish but Peter Lynch\u2019s long-term investing advice still applies &#8221; Legendary fund manager said to buy what you know and that matters in this trigger-happy market As a freelance writer and author, I\u2019ve been fortunate to have interviewed many stock-market gurus over the years. One of the most memorable&#8230;<\/p>\n","protected":false},"author":1,"featured_media":222381,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-222380","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/222380","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=222380"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/222380\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/222381"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=222380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=222380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=222380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}