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By Nigam Arora

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• Our portfolios were up to 61% protected before the downdraft of late 2018.

• We took advantage of the market dip to add to positions.

• The chart shows the behavior of RSI (Relative Strength Index) is positive.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

What to do now

Investors ought to consider taking a nimble approach, as illustrated by the real-life foregoing example. The approach includes the following:

• Start with the notion that the markets owe you nothing. Many investors have been brainwashed into believing that they are entitled to a return if they buy and hold. Please see “Investors are forgetting that the stock market owes them nothing.”

• Stay invested in good long-term individual stocks and ETF positions, but adjust the overall amount invested based on market conditions, especially money flows. Please see “Here’s the most recent update on money flows in Nvidia, Apple and Amazon.”

• Deploy cash slowly when the market dips.

• Slowly raise more cash when the market rallies.

• Establish or add to hedges on rallies when hedges become cheap.

• Take profits on hedges on dips.

• Diversify by time frames. The chart above shows a good example of opportunistically starting a short-term position right at the bottom of the market and taking profits on this rally. With diversification by time frames, if trades do not work out in one time frame, other positions in a different time frame tend to work out — remember, markets fluctuate. This way, investors also are always in the mode of booking some profits while allowing long-term positions to run.

• Diversify by strategies. Please see “Here’s an evergreen strategy to make money in a volatile stock market.”

• This approach makes dreaded volatility your friend.

This is an evergreen approach that works under all market conditions. However, parameters need to be adjusted as market conditions change. Our consistent long-term track record in bull and bear markets has shown that this approach is far superior to just timing the market, or buying and holding.

Bellwethers

In addition to the averages, investors ought to keep a close eye on market bellwethers and money flows in them. Popular tech stocks Apple /zigman2/quotes/202934861/composite AAPL -1.16% , Facebook /zigman2/quotes/205064656/composite FB +1.98% , Netflix /zigman2/quotes/202353025/composite NFLX -2.02%  and Amazon /zigman2/quotes/210331248/composite AMZN +0.70%  are still bellwethers. Other important bellwethers are exporters such as Caterpillar /zigman2/quotes/203434128/composite CAT +1.24%  and Boeing /zigman2/quotes/208579720/composite BA -4.83% .

It is also important to keep an eye on banks such as J.P. Morgan Chase /zigman2/quotes/205971034/composite JPM +1.32% and Bank of America /zigman2/quotes/200894270/composite BAC +3.51% .

These days, oil is highly correlated to the stock market and often leads. Keep an eye on the United States Oil ETF /zigman2/quotes/203483736/composite USO -7.12% , the Energy Select Sector SPDR ETF /zigman2/quotes/206420077/composite XLE +2.13% and Continental Resources /zigman2/quotes/200740136/composite CLR +10.12% .

Also see: For 2019, it’s about how to make money even if there’s a bear market

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.

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US : U.S.: Nasdaq
$ 168.83
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P/E Ratio
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N/A
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$481.24 billion
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US : U.S.: Nasdaq
$ 372.28
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90.06
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$ 2,011.60
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N/A
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/zigman2/quotes/203434128/composite
US : U.S.: NYSE
$ 121.92
+1.49 +1.24%
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3.38%
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$67.07 billion
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US : U.S.: NYSE
$ 141.58
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April 7, 2020 6:30p
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0.00%
Market Cap
$79.88 billion
Rev. per Employee
$660,961
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/zigman2/quotes/205971034/composite
US : U.S.: NYSE
$ 90.64
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P/E Ratio
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3.97%
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$278.63 billion
Rev. per Employee
$497,647
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/zigman2/quotes/200894270/composite
US : U.S.: NYSE
$ 22.14
+0.75 +3.51%
Volume: 94.56M
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P/E Ratio
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Market Cap
$193.25 billion
Rev. per Employee
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/zigman2/quotes/203483736/composite
US : U.S.: NYSE Arca
$ 5.09
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US : U.S.: NYSE Arca
$ 32.08
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/zigman2/quotes/200740136/composite
US : U.S.: NYSE
$ 10.45
+0.96 +10.12%
Volume: 10.87M
April 7, 2020 6:30p
P/E Ratio
5.02
Dividend Yield
1.91%
Market Cap
$3.82 billion
Rev. per Employee
$3.88M
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Nigam Arora is an engineer, nuclear physicist, author, and entrepreneur and the founder of two Inc. 500 fastest growing companies. He is also the developer of the ZYX Change Method to profit from change by investing. The premise is that most money is made by predicting change before the crowd. Arora is the chief investment officer at The Arora Report and the editor of four newsletters that track the ZYX Change Method. Nigam can be reached at Nigam@TheAroraReport.com

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