A Correction Of 35 To 50 Percent Is Coming?

Some investors are worried when their portfolio drops 10 percent in value, but then do not take action. Other investors can see 20 percent of their portfolio go up in smoke and still be nailed to the ground. Is their portfolio at minus 30 percent, they will decide to take their money off the table next time their portfolio is where it once was. This is a problem, according to trader and MarketWatch contributor Mark D. Cook.

According to Cook it could be a big problem for people who are closing in on retirement or people with certain financial targets or goals who cannot hold on to their investments for a long enough time.

Successful Investors And Corrections

A few years back Cook evaluated how successful investment managers see success. It appears that these people often judge themselves by what they did upfront and not by how they respond to disasters. These smart guys know that they have to reduce their exposure when their investments go up, so their risks get smaller. Experienced investors know that if, and not when, a correction happens in the market, a plan already needed to be in place.

That is what retail investors should be doing as well, Cook writes. In his eyes, a big correction is when the market drops about 35 to 50 percent in more than 2 years. What should you be doing to prepare? Cook says taking profits and increasing your cash position is a great move. The man also mentioned that he has made the most money in the market with contrarian moves: buy when other people are scared and sell when other investors are the happiest they’ve ever been.