Don't Blink...

Written by Nathan White, Chief Investment Officer

 
photo from iStockphoto

I have always been amazed at how fast markets can move.

If your pieces are not in place before a move occurs you often miss out on the best part of the move.

The hard part about getting your pieces in place before a move is that you must act early and you must pay the price of being wrong for a while. This is the trade-off, and there is no way around it.

Look at the way so many are now scrambling to get in the market now that the sun has appeared through the clouds and the world has not ended. The opposite is just as true after as people clamor to get out of the market after it drops.

If the clouds have parted, how should your investments be positioned?

At Paragon Wealth Management, we favor sectors and asset classes that perform the best after market bottoms. These include areas such as emerging markets, which can benefit from a snap back in demand not only from the U.S. but from domestic demand as well.

In prior periods, many of these markets were wholly dependant upon the U.S. However, with emerging middle-classes in countries such as Brazil and China the potential for growth is amplified. Sectors that get beat up the most in sell-offs often have the most "snap back" potential.

The Material and Financial sectors really took it on the chin during the last six months and have been roaring back with a vengeance after being severely over-sold. Other areas that perform well during recovery periods are Technology and Small-Cap.

It can be very difficult from a psychological standpoint to get back into the market after a low has been established.

People are so shell-shocked by the bear market that no one believes the rally when it first starts. Many (professional and individuals) wait for a re-test or pull-back to get back in only to have the market steadily clime away from them.

Does this sound familiar?