Buying and Holding on to Hope
Have you ever said to yourself, “It’ll turn around”? I am willing to bet most of us have said or thought something close to that at one time or another. These three words tell us a lot about what is going on in our heads. Currently the Dow ($DJI) has created a double top and many Who’s Who’s and financial What’s It’s are saying there is a bubble. We are in correction territory but are we teetering to a potential recession? The answer is; who the heck knows. The right question to ask is what type of investor/trader are you? Are you going to hold on to hope? Or are you going to base decisions off of performance of the market/stock?
I use the stock market as a vehicle for making money, and for personal growth. It’s a tool, just like your car is for getting you to and from where you want to go. If your car wasn’t working properly would you hold onto it and keep it in its current state, hoping that things turn around with its performance? Hopefully not. The car is no longer useful in fulfilling its specific task or purpose. So, if the market is a vehicle and it is not performing, why would you still keep your money attached to that vehicle?
It has been difficult for me to let go of the idea of buying and holding on to hope. My earliest exposure to the stock market was through long-term investing. Today and generations before us, we were taught to buy and hold which means keeping our money in the market and riding out the highs and lows. We were taught; “Don’t sell a losing position” or “don’t try and time the market”…. “hold on until the market turns around”. If like me, you fall/fell into this category and you have successfully followed this advice, then you have made neural connections in your brain (physically changed) and also emotionally developed to support the idea of buy and hold (emotionally changed). This creates a nasty hurdle when you move into a performance based process of investing and day trading.
Yes, historically the stock market has, over time, turned around after depressions, recessions, and corrections gradually increasing in value. Look how far the market has come from 2007 to the present. If we look at the Dow, it hit an all time high in 2007 (14279.96) and the low was in the Spring of 2009 (6440.08). The Dow then surpassed the previous high set in 2007 in the Spring of 2013 (14413.20) marking a successful come back. Many people lost everything in 2008/2009, while others white knuckled their way through it believing things would get better (holding on to hope) with no real indication of a turn around. What if we could avoid all the nail biting and white knuckled grips of stress? We can with a performance based software and trading strategy that works on all timelines in stocks and options.
Some people look at the above scenario and at their portfolios as a moment of triumph. This reinforces the themes they were taught about buy and hold (on to hope). America recovered and our portfolios grew steadily year over year. I mean, what a come back! Or was it really a missed opportunity for growth? Utilizing the long term market investment chart on Trader Genius (TG), we
can look back and see that the software’s advice provided massive opportunity during that time to not only avoid major losses but also to guide forward major growth. It took six years for the Dow to move past the previous high. That means if you bought and held through the recession and had 10 shares it took you six years to recover the value of those shares.
If we look at the the recommendations set forth by the TG software, which is performance based, we can see the software recommended getting out of the market in early 2008 at a Dow price of 13056.72, and re entering the market in the spring of 2009 (8409.85). This effectively increased the buying power by a little over 1.5 times. Now, instead of waiting six years to recover the value of the 10 shares you own, you now have 15 shares at a discounted rate. So from Spring 2009 when you reentered the market to Spring 2013 when the Dow broke its previous high, you would have seen major growth to the tune of 71% on an additional five shares.
Someone once told me that when the market is down find some cash to buy. That’s hard, a lot of people are not cash fluid. Money is tied up in paying for past decisions, living above their means, or in investments. Generally speaking, our society is cash poor and debt rich. Well what if you didn’t have to go searching for investable cash? If your current stocks are being sent to the chop shop, what if you based your trading decisions on the performance of the stock and put your invested money into cash when performance begins to lag? Once performance improves you have cash on hand to buy stocks at a discounted rate. This can be done with a time tested, time proven software and trading strategy. Just remember, if you have been buying and holding onto hope then there will be physical and emotional hurdles to overcome. Do you want to begin the transition now or when the next recession hits and emotions are high?