In his recent presentation, seasoned investor Charlie Dreifus explains how to invest in a falling market. Here is an excerpt from the presentation:
I’ve been doing this professionally for 54 years, which means I was actually a young portfolio manager running a pension fund between 1972 and 1975, also known as the Nifty Fifty era. And that was at a time when, much like FANG stocks today, there was an anointed group selling at very high valuations. We obviously saw this in the dot.com bubble. It repeats itself. History is therefore a good instructor in these matters.
And the market, top to bottom, fell 50%. This insight I learned then was instilled in me by a veteran trader. And he says to me, Charlie, hold your horses. This is the start of a bear market. What you need to do is you need to pace your purchases, average dollar cost. You don’t know how long it will take.
So what I learned then was a pyramid. What you do is you buy, think at the top of the pyramid, you buy a little. And the lower the price, the more you buy. And on days when the market goes up, you stop buying, assuming it’s going to go down tomorrow or the day after.
You can watch the full presentation here:
Charlie Dreifus: How a veteran PM invests in bear markets
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