Pretty much my approach. When there's a big spike, I just sell it and buy after the crash. Sucks timing t, but when you feel its gone too far I just sell and buy back when it's lower. I'll bite one eventually, I think, but for now, I'm pretty on top.
How do you ensure that you react fast when the market crashes? Do you have some kind of stop-loss setup that pulls you out of the market faster than all the “losers” of the game?
Basically, you don't. It's called "market timing", and it's widely considered a bad idea.
Market timing is basically trying to estimate the psychology of other people in the market, rather than looking at the underlying value of the assets. People are irrational, and they're not irrational in sufficiently predictable ways to consistently make money off of it. Over a sufficiently long term (perhaps 5 years), you'll do better on average to just let your money sit there through the declines.
That said... it's always really hard when markets get wildly overpriced, like they had been for at least 5 years. Rational analysis would say "Don't be involved with this". Smart people did... but they also had to basically sit on their money for years while the irrationally exuberant market got less irrational.
The saying is that the market can remain irrational longer than you can remain solvent. Trying to out-irrational other people is theoretically profitable but practically impossible.
But you need to time the dip with this strategy, otherwise you're underwater in the meantime.
I think the question was, "How can I profit as things get worse?" Or, "What are good ways to protect myself as things go downhill?"
My recommendation? Reduce expenses. And think about investing in ways to reduce those expenses - Toilet paper is expensive, buying a bidet can save money after X uses. Meat can be expensive, see if a farmer in your area is willing to sell you the meat of a full cow at a discount for you to freeze and use over the course of X months.
Timing the market is possible if you know more than the market otherwise it’s just gambling.
But what do you do if you got lucky selling now?
I sold three weeks ago figuring it would be bumpy ahead, but I don’t want to miss the bottom entirely. Now I’m thinking the low risk strategy is to buy very slowly over a long period.
Well, what can you do- buy into the market now? If you really believe that strongly in the idea that it's impossible to time the market then be my guest!
Your options pretty much boil down to "a crash is coming" (so says everyone for the last 5 years), or "it's different this time" (we all know the issue with that)
If you expect a wave of debt defaults then that will cause asset price deflation. So accumulate cash now and then use it to buy assets at a discount after the fallout. Of course trying to time the market seldom works for individual investors.
You don't. You can wait for obvious signs (government interventions), but if you wait for that, it won't be the bottom anymore. Better to just wait until the bleeding stops. Don't try to time the market exactly.
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