There are these moments in time that assets are dumped, worth far less than their real value. That is the time when you should be buying these assets. Of course, you need to have the cash available to do so.
The market correction of January presented such an opportunity. Some really high quality stocks I am interested in were priced crazy low. Unfortunately, I did not mange to seize the best out of the moment. I was lacking a plan.
My steps to seize investment opportunities
A first condition is to have cash available to invest. Part of my portfolio is in cash. I can use some of that, but it has already a purpose: serve as security for my put writing. Although it is not kept in my trading account, I prefer to have some cash available for severe markets conditions that could trigger some assignments of stock.
Early July, I altered our plan to have cash available for such an occasion. I had a little bit of cash available as a result. Not a lot, but some. So, we need some more. But at least, there is cash available to seize the opportunity. Given the savings rate of January, I will allocate some more cash to this part of the portfolio.
A second condition is to have a plan on how and with how much to enter the market. This, I do not have. This means that I can not be mechanical when the conditions are there. Each day, I look and wonder what I will buy, if I will buy and at the end, I do something. More a random act than a planned move.
Going forward, this is the plan
If the below is not applicable, invest less than foresee
Market is 15 pct below the average price of the world tracker –> buy without putting extra money aside
Market is 20 pct below the average price of the world tracker –> use 20 pct of the funds to increase the position in the tracker Market is 30 pct below the average price of the world tracker –> use 20 pct of the funds to increase the position in the tracker
On a reread, this sounds too complex. First of all, 20 pct of the saved up money is for now way too small to initiate an order. Then, It requires me to follow up too much.
I rather keep buying each month, but less than foreseen as long as I am not able to buy 15 pct below the average cost of my world tracker. This is easily verified at order entry. Next to that, I will put in a limit order at an extra low price compared to my average cost. If the market tanks during the month, I buy extra. If I run out of cash, I stop this.
To me, this feels like an achievable plan that allows me to profit from market corrections
Do you have a plan in place to seize investment opportunities? Or are you all the time fully invested?