Last Friday here I told you that timing markets isn’t only possible, but it’s very, very profitable, and I ticked off lots of household names who’ve proven it works by making billions of dollars timing markets successfully.
But there’s a trick to it.
Today I’m going to reveal what it is.
Because a lot of people think this bull market’s going to end, maybe very soon, maybe spectacularly, and they either haven’t gotten fully invested out of fear, or they’re going to sell early, maybe very early, because they’re afraid they won’t see the end coming.
Even worse, investors who don’t see the end coming could ride the market all the way down and lose, maybe everything.
Good timing allows you to load up in the right direction and gets you out of the way when things turn.
The kind of timing that I’m talking about that’s going to make you a lot of money, in bull markets and bear markets, isn’t the kind of clockwork timing that traders employ.
The Difference Between Trading and Investing Is Time
Every single investment starts off as a trade. All that means is no matter how much research or analysis you do, or don’t do, you start off the same way, you put on a position.
Time determines whether your position is a trade or an investment.
If I put on a trade thinking it’s going to be an investment, if it goes my way, and if it keeps going up, then it’s a good investment. The more time I’m in that position, the more it goes up, and the better investment it is.
If I put on a position, even if I think it’s going to be an investment position, and it goes against me, I either sell it and take my loss and reassess the investment, maybe getting into it again later. Or I’ll buy more stock lower, averaging down, because I’m highly confident it’s going to turn around and go up.
If my would-be investment stock doesn’t go up, at some level, usually for me between a 10%-20% hit, I’ll take my loss and move on. That position ends up being a trade, a losing trade, and not a big deal.
If my stock goes up and keeps going up, it’s an investment and I’ll keep the position, I’ll even add to it on the way up, as long as the company I’m invested in is doing what it’s supposed to be doing.
And more importantly, I’ll stay invested as long as the market is going up.
You must know what the company you’re invested is doing, and how well they’re doing it. Otherwise, even if the market’s soaring, if you’re hanging onto a loser, like a Blockbuster or a General Electric, you’re going to be a loser.
Timing when to get out of a stock is about knowing the individual company, the stock you’re holding.
I’ll write about how to deal with individual stocks that aren’t going your way another time.
Today, we’re talking about timing the market.
Time the Market Right to Stop Losing Life Changing Gains
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The market’s almost always more important than your individual stocks. That’s because when the market turns down, turns into a bear market, it moves stocks, even good ones, in the direction it’s going,
Right now, even more than from last October through Christmas when the market scared the heck out of everyone, the media, financial pundits, and rich clients of major banks, and they turn negative on stocks.
They’re pulling out all the negative narratives again and fearmongering that this latest run up is a trap. Some analysts are saying we’re in the process of building up to a “blow-off top”. Other analysts are saying that all the negatives which the market’s marched over and the whole “wall of worry” which the market’s climbed is going to come crashing down on investors, maybe like in 2008, maybe worse.
And guess what, they may be right.
But that doesn’t matter, because they may be right next month, next quarter, next year, or in 3 years.
If you get out of the market now, or before it turns, you could lose out on massive gains.
According to some analysts, as many as 30% to 50% of investors who got out of the market in 2008 taking their massive losses off the table, didn’t get back in at all, because they were afraid.
They missed out on the longest bull market in history. Even now, there’s so much money on the sidelines, by some reckoning $1.5 trillion to $20 trillion.
I’ve taken apart those numbers and where they come from and the real number is closer to $2-$3 trillion in the United States.
In fact, that’s enough money to power stocks higher by 10%, 20%, 50% or more, depending on when and how that money comes in.
I’ve been bullish since March 19, 2009, and I’m on record and have been on T.V. cheering on the bull the whole time. I turned “cautious” only twice.
In the 128-month (10 years and 8 months) bull market, the uptrend was broken twice. Once in late 2015-early 2016 when the market fell but didn’t turn into a bear market. Stocks made a double bottom then, with one low in 2015 and the other in early 2016. That double-bottom created a support level that was never broken. That’s why I was only “cautious” during that dip.
After that pullback another steep run began, taking stocks to all-time highs again and again and again.
The only other break in the bull market’s uptrend was 2018’s October-to-Christmas sharp, quick correction. Stocks turned back higher so quickly after that blip that investors who panicked and got out have missed getting back in. I called for caution then, but never called the action for the end of the bull market.
That’s because the major trend of the market turned right back up. And lo and behold, we made new all-time highs, again and again.
It’s not over, maybe not even close. This bull market can take stocks a lot higher.
What matters, the only thing that really matters, is the “trend” of the market.
The trend is your friend. It’s been up. It’s still up. Stay invested until the trend turns.
What might cause a turn in the market? I’ll lay out all the negative narratives starting Friday and tell you what you need to watch and how to tell what impact they are having separately and collectively.