Just wanted to share with everyone some general thoughts that I have, or to simply put it, my trading philosophy.
From my perspective, we are currently in a bear market, be it over there in New York, or over here in London. It's still surprises me how quickly the market can change, one superb earnings announcement, and every exchange around the world ends in green territory. If you look more closely, businesses hardly change, and it's not everyday you see major strategic moves quarter over quarter, or even year over year. Hence, business fundamentals for most of companies don't change much either, but their stocks continue to become extremely volatile swinging either way without warning.
There is clearly little justification for these equity movements when you consider the underlying businesses. The declines are, I believe, more of a reflection of illiquid markets, economic conditions and a few major market players, or outright gamblers for that matter. It's just part of the game and something you need to consider before investing in any stock. Most of the time, you're playing against the odds of the generic market condition, with the exchange acting as the poker-hand dealer.
So what's my philosophy in the end? Well, I'm just waiting it out, and so should you (look at my portfolio here, it's all in red) This applies to the real-world as well. As long as the business fundamentals of the companies you're investing in aren't bad, then the stocks should bottom and eventually recover. Of course, the timing for the new bull market isn't that easy to predict. But for strong fundamentals, the odds favour a new bull market at some point and you can wait out the bear with no fear of a permanent loss of capital. Like I mentioned above, sentiment can and does turn bullish in the blink of an eye, and it's silly to sell if the businesses are doing OK. It's just a question of time.
Finally, there is probably one other thing to remember: In depth analysis is never all that important in the stock market. Aside from the fact that market is most often irrational, sophisticated analysis is clearly not needed in a bull market and in a bear market you don´t want to hear it. In other words, too much information is, I believe, dangerous to the health of your portfolio. If the companies you own have the financial strength to survive a few bad years and the cash flow potential to ignite investor interest in the next bull run, you should be OK. That's at least been my experience from past market sell-offs.