This is more of a philosophical post on dealing with a bear market, rather than the usual self-aggrandizing OMG LOOK AT HOW AWESOME I AM post.
As you can see by the trading in 2022, both the rallies and slumps are strong. The gyrations are so extreme, it causes people to freeze and become catatonic about their investments, relegating them to long term holdings that needn’t be looked after. This is a disastrous mistake and you’d only be serving someone else’s interests rather than yours.
People ask me all the time what to do with this market. For the most part, I agree that dollar cost averaging once per month is a smart way of dealing with a down tape. However, for those who already amassed wealth and are looking at retirement within a decade, it’s important that you preserve your wealth —- rather than squandering it.
You should most definitely eliminate growth stocks from your holdings and replace them with staples. But the best option, by far, is to trade and hold overnight and sell everything each morning —- rinse and repeat.
If you’re only buying or shorting closes and closing out those trades in the morning —- your risk is low due to holding period. It goes against all of your instincts of buy and hold for the long term —- but it works and it works especially well in this tape.
A typical overnight trade for me would be to long whatever theme trending for the day, in hopes of a continuation. For 2022 I had been buying Ag and Oil. I would hedge those bets with 15%+ positions in inverse ETFs. Often times my oils went up with the inverse ETFs and I’d close them all out before 9:45, in order to avoid morning gyrations which can be confusing.
The key to all this is to invest smaller, most of the time keeping 30%+ in cash and always hedge. No matter how good the market looks, no matter how many times your overnight hedges lost money — ALWAYS BE HEDGING.
The reason why is the geopolitical tensions and of course the fucking economy. News can bust out at any time sending stocks sea-worthy making you rue the day you thought it was wise to just buy and hold.Comments »