New to Fidelity. Can someone be rich by buying collapsed stocks that give dividends now?
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If your time horizon is long, short term gains don’t matter. So entering the market piece meal, means you are reducing entry point level risk. Risk averse people might invest in gold or keep cash. One approach is 50-50 between stock and stable assets.
You might buy some put options as protection of your ETF investments for extreme bear scenarios.
Whenever markets are frothy is a good time for protective puts. Like this winter before the crash. Things were high even taking covid aside. But this protection costs as well, about 8% in the example above. I pulled out half my portfolio into cash in late fall and put cash in 2% high yield savings accounts. The remaining half is down about 30%. I didn’t buy any protective puts — covid news had broken and markets hadn’t reacted much. So I mistakenly thought we were fine and didn’t pull fully out. Hindsight is 20/20.
I’ve started buying back in. Slowly. 12.5% is back in SPY. I’ll consider putting another 12.5% into the market in 2-3 months.