"Market corrections will happen, better get used to it" by: John Sample

   We finally had a selloff in the high-tech sector last week and it is continuing this week. 
   I almost gave up telling you that things were too far out of hand. You cannot sustain multiples that the FANG stocks were exhibiting.
I don’t see this as the end of the world for stocks. 
   Many will see this as an opportunity to buy at lower levels. I will wait and see. 
   We just had three days of pulling back in the NASDAQ index. That is a quick move down. Corrections usually take a month, but of course this is 2020.
I think you are given an opportunity to really look at where we are going. 
   I doubt that life as we knew it before March will come back anytime soon. 
   This means that you need to find companies that can prosper in this new world. 
   Apple seems to be a prime example. That does not mean that a multiple exceeding usual levels is justified. 
   It does mean that when things get out of hand, the market tends to clean things up.
The latest three-day move down is the largest since early March. This time though, there is really no news. 
   What is happening is that the investors on margin got taken out, increasing the pressure down. 
   The short sellers had to buy back on Friday, turning the market around. 
   Another problem is that options trading also moved the FANG stocks - another means of leveraging a position. 
   This is a perfect storm for volatility, with stocks moving up without explanation such as earnings and now dropping like a rock on no news.
So, what should you do? I suggest avoid catching a knife. I have been after several of my friends who seek advice to realize that we were at record levels and as such it was time to take a profit. 
   Their first thought was that they would have to pay tax. I always counter that paying tax is just a sign that you made a good investment. 
   This is about the fourth time in a year that we set new record highs. At each and every record, we have had a pullback. 
   This really is history repeating itself. One friend sold off 50% of his positions in the FANG stocks he owned. 
   He was up well over 100%. As such, he now had his original money and more back in his pocket. 
   He could then sit on the house’s money with some comfort. He made enough to have the profits cover his taxes. 
   I know how much it irks him to have to pay, but such is life if you invest. 
   Think of all those with little or no profit to take, much less getting their original investment back.
For most, however, this is a moot point as it is in your retirement account, where you are not liable for tax. An even greater reason to take some risk off the table.

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