Please do not mistake drops in pricing for stock markets as the same as drops in market groups or individual stocks.
You can be "lazy" and buy broad market indexes or widely diversified mutual funds. Lazy means you don't do any homework to learn what might be changing that devalues the firm.
But you are very unwise to be buying specific stocks under high levels of duress without doing solid research. Let me offer some examples.
You youngsters might not realize this, but most of the airlines of the 1960's went broke or got sold cheap to other airlines. Most airlines never earned back their capital cost to open. It might seem prudent to buy airline stocks when they are beaten down, but first you have to decide if they are going to survive at all. 75% off could be a bargain but it also could be buying a corpse.
The cruise industry is a lot more profitable than the airlines. But even there, you should be digging into the books of the company and reading the fine print footnotes. Someone with a looming cash shortfall could easily be driven into bankruptcy while the fundamental business is sound.
There are going to be wholesale failures in the oil patch. No company's dividend is assured safe. It is quite unlikely many companies are prepared for this huge a drop in oil prices. Plenty of exploration companies are "walking dead" right now. Shale production is a high leverage, quick in and out sort of business. Pretty much they are all going broke. The huge production companies aren't so risky, but sooner of later the dividends will come under pressure. I offer a specific warning about Aramco, just say no, no yield, no assurance of accurate financials, risk of self dealing and/or conflicts of interest with management.
So what does homework mean? In general it means reading three years+ worth of reports with particular focus on the debt structures and unused lines of credit. If this isn't your professional expertise, you likely don't have the skills. If you think you can outsmart the professionals without similar skills, then YOU are the sucker at the table. Some of these distressed industries are going to see significant restructuring at greatly reduced pricing. You do not want to be on the wrong side of this sort of merger / buyout.
You need to know what you are doing when bottom feeding off specific companies. Really! Otherwise, stick to indexes and mutual funds. Timing the market is risky enough. Trying the same with specific companies is foolish unless you know what you are doing.
Keep in mind that I am old enough to remember Dow Jones 1,000 was considered crazy optimism. I was trading when the 1987 crash happened. DJ 2,300 fell to 1,500 in a month - that was a 35% loss in five weeks. The great recession saw the market drop from 14,000 to 7,000, 50% in 18 months from fall 2007 to spring 2009.
This is "the first rodeo" for many investors. You might not fully grasp how bad things can be or for how long. It is also true, a properly diversified, long term investor never lost money in these bear markets so long as they had time to let the market recover. Trading market dips is not for everyone, or even most people. The learning curve can be expensive and steep with no assurance you'll do any better than losing your ass.
Trade with your "fun money". Put idle money to work eventually, 0.5% a year on a ten year treasury note is a certain loser due to taxes and inflation. Buy the market, close your eyes and wait till your golden years.
DrStrange
