Wall Street is all abuzz about the current market dislocation in the country. Dislocation occurs when markets, such as the current one, operating under stressful conditions fail to price assets correctly. This scenario increases volatility and makes some investors nervous because it’s hard to determine exactly when or how to time sales and purchases.
But, it could work to the advantage for the level-headed investor who does not mind a little calculated risk. As some panicked investors dump assets, there are others who swoop in to pick them up at fire-sale prices. Fortunes can be made during times of dislocation if the game is played correctly.
There are things to know before jumping into the fray. For instance, be wary of diving head first into European markets. The only thing that separates them is the printing press, and the ability to print money can be the difference between a strong and weak market. Watch for emerging markets, those countries that are developing economies quickly, because while the stocks may seem cheaper there are transaction costs that can and will add up over time. And, keep an eye on the underdog. Greece has been a battered economy for a while, but it may be worth looking at sectors in the country that relate to industrial needs (i.e. necessary).
Marketwatch has five tips every bold investor should know.