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Posted July 28, 2021

Jonathan Rodriguez

By Jonathan Rodriguez

Three Pro Tips to Keep Your Head Up When Stocks Go Down

I'm J-Rod and welcome back to Stocks That Rock.

Each week, I turn up the volume on a breakout stock that will rock your retirement account.

Today, however, we're going to do something different...

As stocks have slid lower recently, my inbox has blown up with questions on how to survive selloffs.

So in this video, I'm going to share my three pro tips for keeping your head up when stocks go down.

Click the video below to check them out.

Tip 1: Get Your Bearings

Alright...

When stocks start slipping, the first thing you want to do is get your bearings.

The worst thing you can do is panic and sell off all your stocks.

After all, the goal of any investment is to buy low and sell high, right?

So to me, getting your bearings means taking a look at your portfolio and asking...

Are you performing better, worse, or in-line with the overall market?

In other words, compare your portfolio to the major stock indexes.

You can use the S&P 500, the Dow Jones Industrial Average, or the Nasdaq Composite for this.

If you're beating the market in a selloff, that's a really good place to be.

Even if you're down money.

In this case, you should probably sit on your hands and do nothing...

Because your trades are doing what they're supposed to.

However, if you're underperforming the market...

You should take a closer look at your individual positions.

So what I'll do is bring up a chart of each of my individual stocks...

And measure each one against the S&P 500 and the stock's sector ETF.

Let's use Apple as an example.

Apple is a technology stock, so you can use iShares large-cap tech XLK as the benchmark ETF.

Year-to-date 2021, Apple shares have underperformed the market and other tech stocks by a decent clip.

But over the last year, the stock is up more than 60% compared to a 37% gain for the S&P.

And shares have nearly tripled over the last two years... outpacing tech and the market by a wide margin.

So I'm probably chalking up the weakness here to a cool-off after a rip-roaring rally.

And because I like the stock a lot over the longer term...

I'm probably using dips to add to an existing position — rather than sell.

However, IBM, another tech stock, has underperformed the benchmarks over the last year.

In fact, it's down 5% in the last two years while tech stocks have ripped higher.

This is one I'm probably walking away from in a choppy market based on performance alone.

Easy enough, right?

Just measure your portfolio and each position against the market...

Before you take any drastic action.

Once you've got your bearings, you can move on to Tip 2

Tip 2: Put your Portfolio Through the "Gunslinger Gut-Check"

Everybody handles trade management differently.

But the way I do things is very simple...

And my "Gunslinger Gut-Check" can help you size up your trades and reallocate your capital quickly.

Every trade I make comes down to two elements.

How confident am I that a trade will earn me a profit?

And how long is it going to take for me to earn that profit?

In a stock market selloff, I review each one of my positions and make sure the trades are going according to my plan.

And if not... I cut my losers short and put more into my winners.

But only after I've done the gut check!

Here's how I make that determination...

Confidence-wise, I divide all my trades into high and low conviction.

So trades I really believe and others that I'm basically speculating on.

In terms of time horizon...

Trades I plan to hold for less than a year are labeled short-term...

Trades I'm planning to hold for more than a year are long-term.

For high conviction bets...

If I'm still hot on the trade idea and I'm holding the position long-term...

I'll use weaknesses to add to my position along attractive entry points.

And for me, that means picking up shares along the 50 or 200-day moving average.

I also like to add shares at trend lines, especially if they've proven to be strong support in the past.

On the other hand, I'll sell off my losing short-term low conviction trades to free up cash for more exciting opportunities...

Or I'll use that cash to add to my profitable positions.

If I'm in a low conviction trade that I plan to hold long-term... I'll hold unless a better play comes my way.

The key here is that you need to be honest with yourself about each position.

Money you've tied up in low-conviction trades stuck in neutral will eat away at you.

And you'll be more likely to make bad decisions.

But if your A-list trades are doing their job and moving higher... put more into those winners.

Because if most of your cash is working up in trades that you believe in...

You can sleep easier at night and ride out the storms.

Last but not least, let's move to Tip 3...

Tip 3: Build Your Watchlist

I'm a bargain hunter...

And I love market pullbacks because they give me a chance to take new positions in stocks at marked-down prices.

But when you show up for the sale, you've got to have your shopping list ready to go.

So here's how you put the list together like a pro...

First thing, you've got to ask yourself...

What stocks do you like? And where are the attractive entry points?

Right now, my favorite stock themes are cannabis and electric vehicles.

So I'll look at those two industries first to hunt for new trades.

And I always aim to take new positions on pullbacks to moving averages or trend line support levels... like we talked about earlier.

Like my trading portfolio...

I try to keep my watchlist to no more than seven names.

So I can comfortably keep track of each name amid all the craziness of life.

But yeah, once your list is set...

You make your move on the watchlist play — when the conditions are just right.

And because you've done all the new trade legwork ahead of time...

You're not stressing about doing research when it's time to make the trade.

You just execute and move on with your life.

Simple enough, right?

Alright... to sum everything up...

Here are the three pro tips one more time:

Step 1: Get Your Bearings

Step 2: Put the Portfolio through the "Gunslinger Gut-Check"

Step 3: Build Your Watchlist

Do these three things during stock selloffs and you'll sail the seas with ease.

Thanks for watching today's video.

If you enjoyed the content, please hit the like button...

And subscribe to the Rich Retirement TV YouTube channel so you never miss any of these hard-hitting videos.

Thanks again...

And for Rich Retirement TV, I'm J-Rod and I'll see you next time.

On the hunt,

Jonathan Rodriguez
Senior Analyst, Rich Retirement Letter

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