The stock market bottom is “close”! Here’s how I’m preparing for a rally

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2022 has proven to be a challenging time for investors. Market volatility has been high and predictions of a stock market rally at the start of the year fizzled out quite quickly.

However, hopes that global share markets are now in recovery mode are beginning to pick up traction. Take Nigel Green, CEO of financial services firm deVere Group, for example. He says that “the markets have been shaken in recent months, but now I’m calling it: the bottom is very close.”

In fact, Green goes on to say that “with a bounce on its way, investors should be positioning portfolios to take advantage of the rally.”

Positive signs

Green also says that fresh buying sprees by ‘insiders’ — in other words individuals who own more than 10% of a publicly-traded company’s voting shares — suggests the bottom is near. These individuals are “taking advantage of reasonable valuations to top-up stakes in quality companies,” he explains.

Green adds however that sensible investing is about more than just “piling into lower-priced, high-quality investments.” He stresses the importance of investing “judiciously” and being aware of “shifting economic landscapes and trends.”

Shrewd investment strategies

Taking the time to build a well-balanced stocks portfolio is also key to building long-term wealth. Green says that “a suitable balance across asset classes, geographical regions and sectors” reduces the chances of all assets in one’s portfolio declining at the same time.

He adds that investors can miss out on longer-term advantages if they don’t properly diversify their holdings, too.

Keeping a cool head

Dealing with periods of extreme volatility is part and parcel of stock market investing. No matter how much we try to remove emotion from our investing decisions we are, at the end of the day, only human. Staying cool when everyone else is heading for the exits is easier said than done. And particularly for less-experienced investors.

However, those individuals that manage to stay level-headed can avoid getting washed out. Sensible investing means taking a long-term approach and history shows us that stock markets always recover strongly from economic, political and social crises. This is why I haven’t sold a single share during the 2022 stock market crash.

Here’s what I’m doing now

In fact, I’ve taken the same approach as Green and been preparing for a fresh stock market rally. I’ve done this by building a shopping list of shares that I think have been oversold in 2022. So far, I’ve added Spire Healthcare Group and The Renewables Infrastructure Group to my portfolio. And I’ve increased my holdings in Games Workshop as well.

All these UK shares have fallen sharply during recent bouts of market volatility. But I’m confident in the long-term outlook for these stocks and I think they could rise strongly during a stock market recovery.

I’m using recent choppiness as a buying opportunity rather than a reason to run for the hills. And I plan to continue building my portfolio in the days and weeks ahead.

The post The stock market bottom is “close”! Here’s how I’m preparing for a rally appeared first on The Motley Fool UK.

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Royston Wild has positions in Spire Healthcare, The Renewables Infrastructure Group and Games Workshop. The Motley Fool UK has recommended Games Workshop. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.