If you look at the $SPY chart above, you might notice one thing, the Stock Market is at all time highs, if you are a new investor you might want to approach the market with a good strategy or you might find yourself losing money this year, now this does not mean you should not invest, anyone who is able to should invest in the stock market however you need to have a strategy because in 2020 it is possible that the stock market might be in a bubble that could be close to popping.
When you look at investing, there are different ways to approach the Stock Market, you have your day traders and swing traders who look at the stock charts and buy based on the price action, support and resistance levels. Then you have your investors who buy shares based on the value of the company and fundamentals, and then you have your growth investors that look at the most popular stocks and buy based on their trends.
All of these styles of investing can yield you good returns, however when stock share prices are this high you need to be careful and approach the markets with a strategy that best fits you, the truth of the matter is that no one really knows if the stock market in the year 2020 is truly in a bubble, stocks have been trading at high prices for the past 10 years, however it is possible to have a pullback or it is also possible to enter a recession and share prices could plummet.
So how do I personally approach a Stock Market that is potentially in a bubble?
Here is my strategy, now you have to note that this is not a recommendation to buy or sell any securities and you should approach any market based on your own research, do not buy or sell any shares based on other peoples opinion.
in 2020 my strategy to this market follows like this, I will be using a combination of Dividend Investing and swing trading, which means that stocks that pay a dividend and that I consider that have the possibility of moving up will stay in my portfolio, I may even add more shares at cheaper price if shares get a discount, now companies that do not pay a dividend I plan on swing trade them or even day trade them, if a company does not pay a dividend and it is highly volatile or cyclical will be traded for a profit, this also includes Cryptocurrency.
An example would be my most recent trade of Dogecoin, I entered my position based on my technical analysis and continued to hold until the trend started to move up, once I hit resistance I sold near the top, people say that timing the market is not easy but it is doable, when I exited my position I left with a good margin and a good profit.
Now if you look at the above chart you will see the price action for the stock Under Armour, today I entered a small position and bought in at around $20 dollars per share, as you can see there is no dividend yield for this stock and this is a setup for my next swing trade, my exit plan is to profit 5% to 10% depending on how long I have to wait, even if it takes a few weeks and if the stock decides to go down even lower I may average down or hold until the trade is profitable.
Now I do have long term investments like Microsoft, Apple and IBM which I am fully open at selling at all time highs if I need capital, if a stock takes too long to appreciate I plan on holding and collect dividend payments until the stock trends back up, for me this is the best strategy that works for my schedule and my risk tolerance, I highly recommend that in a bull market like this you are open to swing and day trade and take profits if shares appreciate too much.
Bottom line is, the Stock Market may or may not be in a bubble in 2020 and you will need to test what works and what does not work, there is a ton of money to be made and if you want a simple strategy then buy stocks and holding them for or 10 or 20 years is always a valid strategy.
Hope this information was useful, if you need more information or want to leave a comment feel free to leave it in the section below, if you like the content feel free to share with your friends and family, this really helps my blog grow and allows me to continue sharing my experiences in the stock market.
If you are not invested yet and want to open an account with a broker I use Robinhood, link below: