Investment strategies for a downtrending market?

I started trading this year. I've found a way of researching undervalued stocks that has worked well...





However, as investors will know, the market is going nuts right now, bouncing all over and frightening the crap out of everyone! I've lightened the load, and am only down 12% since the highpoint (I’m lucky, I suppose). I am comfortable with the positions I am holding, but…





Like Dredude (great posts btw!) said, there are no good stocks in a down market. So I don't want to take on any more positions until there is some stability. I also want to save a significant portion to average down.





Anyway, what are some investment strategies that work well in such market conditions? Or what has been working for you since the beginning of May, when the downtrend began?

Investment strategies for a downtrending market?
This may sound boring, but ...





buy, buy, buy and hold.


Down markets are the best times to invest. You're getting a better deal that way. You should stay invested in the market all year, so you do not miss the few best days.





I do not panic, I just keep pouring money into my various funds and stocks. Historically, the market recovers and stays on an overall upward trend.





If you have 30+ years before retirement, then you should not worry at all - things will get better.





I don't change my strategy in down markets. I may put a little more money in my safer investments - but that's it.
Reply:I have bought put options on commodities. If the commodity trends down, I make money. The same put option can be bought for individual stocks.
Reply:Today's (monday the 24th) rally is a sign things are looking up. I'm buying while it's cheap.
Reply:i use the rydex inverse funds or profunds inverse funds that basically trade inverse to the s%26amp;p 500. more cost effective than shorting and no hold time requirements on the funds. pure no load and no transaction fee through schwab or some other brokerage firms.
Reply:if you believe a particular stock will go down


then buy put options or short the stock





or if you think there is no chance it will go up you can sell calls.
Reply:I like Igrid G's answer a lot. If you are confident in your stock pick, you should buy more if it drops substantially (for no good reason). You need to study the company and its news to know if there are good reasons or poor reasons for price moves.





Buying high quality companies that pay out higher dividends always helps prop up the price in down markets. Also, some of these companies regularly engage in stock buy-backs which also helps.





A month or two ago you could have invested in non-cyclical stocks such as consumer staples companies. The market is down because investors think that the economy as a whole in headed down. So investors rotate into companies like Proctor and Gamble because they tend to do well when the economy is poor. But it is now too late to switch into these.





Finally, I'm into a couple of young tech company stocks that I think are high quality. But in this market they are quite volatile. So you buy in pieces as it goes down and sell in pieces when it goes up.





I also never sell more than half of my max. number of shares, just in case the price jumps way up unexpectedly. With a little luck you can make money on the wild swings in price that don't reflect anything real happening at the company.





The hedge funds now control about 40% of all money trading in the stock market and these guys create a lot of volatility because they can profit from it.