Stop Trying To Predict The Market. Focus On This Instead…
This market is absolutely insane… and I love it.
But it’s funny when markets are hitting new highs. Most people ask all the wrong questions…
For example, I was out the other day and ran into an old friend. Of course, he asked me about the market and the tech sector specifically. We chatted about how incredible its rally has been.
But then he asked, “what’s the sign that tells us when to get out?” I felt like what he was really asking is what’s the secret indicator that tells us when the next crash is coming.
I didn’t have a good answer for him. In my head, I thought… well when prices start falling they keep falling. But that seemed too hasty of a comment, so I just shrugged and said I wasn’t sure.
I’m sure he was disappointed in my answer. But it’s the truth, I don’t know.
These are the type of questions, though, that I find a bit head-scratching. For example, it’s not the question I would ask Warren Buffett if I had the chance to pick his brain. (And by no means am I comparing myself to the Oracle of Omaha. I don’t hold a candle to him.)
But I’ve found that this is common thinking…
As the market continues to rip higher and higher, folks waste their effort on trying to determine when the market will correct next. In my opinion, it’s a fruitless effort focusing on when it might happen. After all, we all know it will happen. And when it does it’s a matter of how one reacts that will separate the winners from the losers.
Most folks will become paralyzed when the bottom falls out. They will watch their gains eviscerate, holding onto hope.
For us, we have our sell signals in place to help keep our emotions in check. It’s also why I’m huge on limiting risk — by cutting losers short and through proper position sizing (i.e. don’t put too much of your money in one pick).
Don’t get me wrong, I check the pulse of the market with indicators like the Advance/Decline line, trying to gauge whether a pullback in the market is part of a larger trend reversal, or just a breather before it makes its next move up.
But like most indicators, it’s lagging. It doesn’t tell me what’s going to happen, it simply lets me how “healthy” the market is.
The Ugly Reality Of The No. 1 Rule In Investing
Our goal over at Maximum Profit isn’t to buy at the very bottom or sell at the very top. Sure, I’d like to be as close as possible to that, but if that’s the main goal — trying to pinpoint the very bottom or very top — well I have some bad news… it will be a very difficult strategy to execute.
Instead, we want to focus on the trend and momentum. We want to show up to the party fashionably late (when we know it’s a good party) and not be the last one to leave. We want to catch the bulk of the gains and move on.
Our strategy is counter intuitive for most. It goes against the No. 1 rule of investing that you always hear, “buy low and sell high.”
But in reality, buying low and selling high requires much more finesse than you might think.
How do you know when a stock that’s “low” is “low enough”? It can always fall further. And how do you know when a stock that’s hitting new highs is going to stop?
That’s why our strategy is to buy high and sell higher. I’ve talked repeatedly about why I love it when our stocks are hitting new highs. Most investors think they’ve missed the boat. But I get excited. It means the stock’s momentum is still strong and more profits are probable.
What You Should Focus On…
The bottom line is that investing is hard enough as it is. Try not to introduce more emotion (and difficulty) by trying to figure out when the next market crash will be. Because as you waste your efforts on this action, you’re missing out on what can make you money in the markets.
I speak from experience. Looking back over the last decade of the bull market — as the S&P 500 soared more than 200% — I was always trying to figure out when the next market crash was. I was too scared of being “wrong” about an investment. And as I focused my efforts on that my cash sat idle.
Sure, I was invested, but not merely as much as I should have been. And it cost me dearly.
I don’t know if the next market correction will start tomorrow, next week, next month, or next year. But what I do know is that I’m putting my efforts towards finding opportunities that can make us money.
Some investments won’t work out. But that’s okay, so long as I follow my stops, I will survive to fight another day.
I hope that you’ve been enjoying (and profiting) from the stock market’s rally, I know I have. I would love to hear how you’ve done – so feel free to drop me a line and tell me about your best trades (or worst).
P.S. I’ve found a little-known tech stock that’s involved in several massive tech trends: the Internet of Things, satellite technology, 5G, communication, you name it… And the good news is that right now it’s completely unnoticed by the market, which means it’s the perfect setup to make investors a lot of money in the coming months.