Some people are making big mistakes, and others are looking for a place to hide. However, when 480 of the 500 stocks in the S&P are lower, there is not much shelter from the storm. Some analysts will tell you to park your money in some high quality stocks and ride it out, but since when has losing less been a winning strategy? My advice is, don’t hide, but embrace these opportunities instead, and let the market work for you. These are opportunities, not reasons to run scared. In addition, I know many of us are tempted to go on vacation, and you should, but while you are gone let me do the work for you. That is, after all, what Equity Logic is all about. If you are making mistakes, if you are confused, if you are going on vacation, or if you simply do not want to do the work, let me know; I may be able to help.
It is not what we do when we are right, but what we do when we are wrong that defines us as investors. We work hard to achieve the successes that we have realized, but that in no way means that we will make money every day. Every day can be constructive, and we can make forward progress on a daily basis, but progress and making money are not exactly the same.
All too often, investors base their opinions on profits and losses. A good day is considered a day when you make money, and a bad day is considered a day when you lose. Clearly, no one wants to lose money on a regular basis, but losses are a natural part of this business. In fact, for anyone using our integrated strategies, including the improving cost basis approach, but more specifically for those who are using trend tracker, taking losses is part of our strategy.
Consider our trading strategies and realize that we do not make money every day. Someone might approach a given trading day and wonder why we are not constantly updating our parameters and changing the alerts viewer so it fires more alerts. We don't do that because it is not part of the discipline. Although the market appeared as if it was going to decline all day today, our strategy does not change to fit the feeling of the moment. Today was like yesterday and it will be like tomorrow. Every day is exactly the same, which is boring I know, but that is why these strategies remove emotion from this business.
Anyone trying to guess at the direction of the market can be right one day and wrong the next while riding an emotional roller coaster along the way. He will feel great when he's right, awful when he's wrong, but his friends and his family will be able to see it in his eyes as he undulates back and forth from one day to the next, and they will take the ride with him. There is no need to ride that emotional roller coaster, and the strategies I have set forth, though not exciting, do serve more than one purpose.
Not only have our alert viewers and trend tracker performed exceptionally, but they are doing it while managing risk and removing emotion. I know some of you want to be right every day, and I know it is human nature to consider losses as a negative, but they are a natural part of this business. Although we think we could be right every day, we are not (if we were we would already be up 1000% for the year). No one is that smart, and that is why a structured, disciplined, and proactive approach is so important.
Our way of approaching the market is not traditional.
We are not 'buy and hold' investors, as everyone already knows, but even our proactive strategies are not what people are used to. There is an important reason for that. People make stupid human mistakes all the time, and our strategies keep you from making many of those same mistakes, but most people are not used to restrictions like that. Brokerage firms want to give you freedoms, but I have found that most people do not know what to do with those freedoms. Trend Tracker overcomes that hurdle by incorporating structure, and organizing the trading tools at your disposal to work efficiently. Trend Tracker, for example, does not allow you to change your plan in the middle of the trade, mistakes laymen investors do all too often, and something that often turns gains into losses over time too. Furthermore, when they are wrong they make little mistakes worse, and lose more than they should. Too often I have heard stories about people who have turned a small loss into a massive one, something that is not only heartbreaking to hear but also detrimental to the wealth of the person who fails to control his risk properly. Trend Tracker limits that possibility too.
We are not smarter than the market, we will never be, and once we accept that we can embrace the market for what it offers and incorporate strategies and disciplines that will work over time. They do not need to be exciting, we never need to hit home runs, all we need to do is be consistent, treat every day the same way, and manage our risk over time. If we can do that, we can also be exceptional in the face of a disappointing economy and stock market like the one I foresee.
Remember, it is not what we do when we are right, because being right is easy, but it is what we do when we are wrong that defines us as investors, and that will influence our success over time in a meaningful way. It is what we do when we are wrong that matters, in fact in many cases that is all that matters. Neither fear nor greed should be allowed in our world, and if we throttle our emotions we can also stave off those temptations, but the good thing is we do not need to sacrifice return. That sounds like a good trade off to me…does it sound good to you?