Buy and hold works for most folks… But you can do even better with these “rubber band” trades… Don’t miss out on Doug Casey’s predictions…
You may have heard the quote from billionaire investor Warren Buffett: “Our favorite holding period is forever.”
For most folks, that’s great advice.
Most people buy and sell their stocks at exactly the wrong time. They buy after stocks have gone up a lot… and then sell near the bottom.
That kind of thing will get you killed. So unless you have the right tools, you’re better off just holding on over the long term.
But if you want to maximize your returns, there’s an even more profitable strategy you can follow.
As we’ll show you today, if you do the opposite of what the crowd is doing – sell when the market is getting overheated and buy after big downdrafts – you can outperform the buy-and-hold crowd.
In fact, one of our experts here at Legacy Research, master trader Jeff Clark, is doing just that.
We’ll show you why Jeff’s strategy is handily beating the buy-and-hold strategy for stocks – and how you can do the same – in a moment. But first…
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More than 30,000 of your fellow Legacy readers signed up for last night’s premiere of Totally Incorrect: LIVE with legendary crisis investor Doug Casey.
If you tuned in, you can count yourself among a dwindling number of folks who are willing to listen to ideas that are outside of their comfort zone.
For instance, Doug revealed why he believes President Trump will be the last Republican president… that the U.S. will launch a shooting war against China… and that there could soon be another civil war in America.
But don’t worry if you missed last night’s broadcast. We’ve arranged a replay right here.
So if you haven’t already, set aside some time today to hear Doug’s “politically incorrect” predictions… and details on the five speculations that can make you 1,000% or more in the next year.
Now, back to Jeff’s trading strategy… and how it can outperform buy and hold.
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If you stretch the rubber band too far in one direction… it snaps back.
That’s how Jeff approaches trading stocks. He’s always on the lookout for extreme conditions – either overbought or oversold – where the proverbial rubber band is as stretched as possible.
Then he bets on prices snapping back. As he puts it…
Because of the various fees charged by stockbrokers, money managers, and mutual funds, if you stay 100% invested all the time, you will consistently underperform the market.
The only way to beat the market is to deploy cash to buy stocks… as the rubber band stretches to the downside and stocks get to extremely oversold levels. And the only way to have that cash to deploy is to slowly sell your stocks and raise cash… as the rubber band stretches back into overbought territory.
That’s why Jeff routinely advises his readers to take some money off the table when the rubber band gets stretched too far to the upside.
Take a look at this chart…
It tracks the S&P 500 – our regular stand-in for “the U.S. stock market” – going back to the end of 2017.
The red arrows point to days when Jeff published cautionary advice on stocks in our Market Minute e-letter (catch up here, here, and here).
That’s when technical indicators he follows – such as the Volatility Index (VIX), the McClellan Oscillators, and the CBOE Put/Call ratio – were warning of overbought conditions.
We won’t get too far into the weeds here. (For more on that you can follow Jeff’s Market Minute updates here.) Simply put, these indicators signaled to Jeff that the rubber band had stretched too far to the upside… and that it was prudent to sell some stocks and raise some cash.
The blue arrows on the chart, by contrast, point to days when Jeff published bullish advice in Market Minute (here and here). That’s when he saw that the same technical indicators had reached extremely oversold levels.
Jeff didn’t nail the exact bottom of the market decline. But his bullish calls… as the rubber band got stretched to the downside again… gave his readers the chance to buy stocks at cheaper prices than where they had sold them previously.
Here’s Jeff again…
The S&P 500 first crossed above 2,800 back on January 17, 2018. That was 14 months ago. On March 19, the index closed at 2832. So, if you were 100% invested for the entire time, you’ve made a little better than 1% on your money.
But if you routinely took some money off the table when conditions got overheated, then you would have avoided some of the large downdrafts in the market. And you would have had cash available to put to work when conditions got oversold.
In other words, you would have bought low and sold high. And if you can do that consistently, you’ll make money over time as an investor.
Take another look at the chart above.
You’ll see a third red arrow on the right. It marks Jeff’s warning, on February 6, to our Market Minute readers that the rubber band was stretched too far to the upside.
If he’s right, we’ll get another fall in the S&P 500 soon. This will give you the chance to buy in at lower prices than where stocks trade today.
And don’t worry if you’re not tracking the market closely. That’s what Jeff is here for. If you’re not already following along with his market calls, make sure never to miss his Market Minute trading bulletins by signing up here.
They’re free to read. And you’ll get Jeff’s guidance on exactly when it’s time to raise cash… and when it’s time to scoop up stock bargains.
The rise of socialism in America continues to be a hot topic in the mailbag…
Communism and socialism are not forms of government. They are merely business enterprises with different names. They simply do business on a larger scale than most other enterprises. They do business on a national scale using force, fear, and fraud.
Here in the U.S. of A, we actually do have a republican form of government. Our problems stem from the enterprise our duly elected public officers operate for their own benefit and that of their cronies. They use force, fear, and fraud to collect the funds needed to operate their enterprise. They don’t take away our rights. They don’t need to do that. They simply ignore them.
To the enterprise, the citizen is merely human capital. Slaves at large, to be rounded up or drafted and used as needed. Our government’s enterprise has devolved to a welfare program for attorneys, who direct the change of ownership of the slaves as they are rounded up.
Doug Casey is not politically incorrect. He is simply a mouthy political dissident. I certainly don’t agree with all he has to say. I would like to disagree with him more if he wasn’t right so often.
– Ernst A.
Meantime, the conversation turns to cryptos – including Facebook Coin, Facebook’s recent attempt to create the world’s biggest currency network…
Facebook is becoming more corrupt with every new scheme they put into motion. They are hung up on power and it seems too late to do anything about it. My mode of action is to stop using Facebook completely.
– Guru P.K.
I believe your cyber currency is faux money, just like our present-day currency. The Federal Reserve has already shown interest in cyber currency and it fits its dream perfectly.
With help from social media platforms, it will have perfect surveillance over us; it can take out taxes directly from our computer – the amount of which will be determined by its algorithm; it can determine how much “wealth” we have on our individual computers, and change it or “adjust” it on a second-to-second basis: No more underhanded cash deals that it doesn’t receive tax “bits” on; no more banks to control; and it can inflate the “bits” in circulation with a punch of its button.
The Fed hasn’t declared cyber currency a counterfeit, so it is just a matter of time before it gives us 24 hours to turn in our “assets” and “bits.”
– Roger K.
Do you distrust cryptocurrencies, like Roger K.? Are you worried that the Fed will be able to use cryptos to take control of our assets? Write us [email protected].
Regards,
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Chris Lowe
March 28, 2019
Dublin, Ireland