Perhaps the biggest myth that retail investors have about the market is that they need to take huge risks to get huge returns. But truth is, great investors rarely take huge risks. Rather, they take as little risk as possible to get the biggest upside possible (asymmetry).
Take Kyle Bass for example…
He took $30M in 2008–2009 (during the financial crisis) and turned it into $2B in 2 years. He did that never risking more than $0.06 to make a dollar, meaning he can be wrong 15 times and still make money.
Reality is, you will be wrong on many of the bets that you’re going to make, so you want to position yourself so that you can be wrong the majority of the time and still make money.
Another thing that very few retail investors take advantage of is the market cycle…
As you can see from the above, usually the beginning of a bull market starts out with smart money, or the guys who take a bet on a sector that no one is looking at. As the sector moves in a bullish direction and fundamentals start to get better, institutions and more institutions (hedge funds) begin to participate.
Now, as the sector gets more attention, more herd behavior takes place. And as that continues to happen, investment banks start to make money not with their own capital, but by packaging ETFs for the average retail investors who don’t understand much about anything. All retail investors know is, everyone and their moms are talking about it, so they don’t want to miss out.
And that’s typically the last capital that comes into the sector, and ironically, when the most people enter...
If you understand the market cycle, then you know that investing during the “mania phase” is the most risky and yields the least gains, so THE strategy for making life-changing returns is to front-run institutional capital.
When a big fund like Fidelity decides to invest in a sector, they are usually 10% of the buy volume every day for 6 months on the way up, so if you catch any sector in the “Smart Money Phase,” you’re likely to make a ton of money, granted that you have the patience and fortitude to sit through the volatility (often the hardest part).
Capturing one big trend and riding it for all its worth can be the difference between life in a cubicle and achieving financial freedom.
Eating balanced meals during your investment peaks is essential. Remember to drink your Ovaltine!
I am also looking at low card diets and exercise to help me become better investor.
I have found long walks during trading hours to be very helpful.
This is a very funky graphing of what has been defined for decades and called the investor/market sentiment SINE WAVE. It is just a linear representation of the Warren Buffett axiom ... "Be cautious (trim or sell) when others are becoming greedy, and be greedy (buy) when others are becoming terrified."
Back in the days before Woodstock when Joni, Graham, David, and James were all gettin' it together and then stumbled on some people like Steven and Neil "They came up with....." What nobody seems to understand about the stock markets.
There's something happening there in the stock markets and what it is, is NEVER exactly clear, There's a hedge fund with a "BOT" over there, proving the retail investor should stay clear, But if he decides to jump in there are any number of other sharks swimming into water , the ones who manipulate low volume issuance, some specialize in CEFs. The markets are the false idols of Donald Trump. There's 401-K and 403 being ...a SOAB. You got US Senators and Congressmen getting censured for insider trading and Martha going to the Fat Farm for obstruction of justice. Martha became a mentor teaching the difference between a funnel and a fennel and how many teaspoons are in a Tablespoon. Maybe Wall Street came to regard her as the Estragon Lady. But an American Folk hero to some for REFUSING t rat out her friends. Meanwhile AKA Madame Death ended up just being too early instead of being wrong. Meanwhile Michael Cohen, AKA "The Fixer" gets outa jail early. Hillary still gets credit for Susan Rice's lies fabricated to explain the Benghazi disaster. Joe Biden has admitted he does not know any black people with 401-ks or 403-bees totaling more than $2 million $. Marijuana has hit it's Waterloo, as there are still a few states debating how many home grown plants and of what stage of maturity they can be, BEFORE decriminalizing recreational pot. No one knew that the Pot stocks would get busted? Even Wall Street has ditched Bill Cosby. He spends more and more of his rec time watching Emeril explain AIR frying, since Bill already got his PHD explaining why there is air. Eddy Haskell is dead. I had so looked forward to Eddie selling us reverse mortgages on our homes. You woulda thought after the Crazy Eddie stores crashed, he would have moved on to another venture. Whether it was Betty Boop, Bette, or Clara the eyes always have it when the board votes to express their gratitude to the CEOs at Macy's and HertZ , for all they have done. So merger Monday is dying out and the market continues to defy reality. Don't USPS Stamps go up again before Christmas? When do they issue the next Elvis Stamp? Inquiring minds want to find out about that pier in San Francisco burning down. Some kind of China Basin conspiracy involving the mayor?
OK lisztstr...I'll play, with a few brief comments.
First, your chart seems like Investing 101 to me. It's been taught by many, many practitioners.
Second, various stock market studies show "momentum" as a positive factor. Most notable study, Fama-French, showed that since 1920 there are three free lunches in the market, momentum being one of them. The top ten percent beats the bottom ten percentile, hands down.
Lastly, here's an insightful thing to see historically re the stock market:
Good luck all
R48 (grizzly old investor)