"Even if you had a balanced portfolio, everything went down.”

[Overnight]

Only if you panic and got out in 2009. Those who were too dumb (or like a deer in the headlight) to get out of the market, hung on for dear life, ended up a lot better off, recovered nicely.

And that is generally the way it goes on a planet with an intelligent, self-aware species with an economical concept. They make babies. The world generally grows over time, because babies multiply. Babies make more babies.

Thus, the world economy will generally grow over time. There will be periods where the economy slows, and maybe shrinks for a time, but it will always rebound and keep going up, because babies keep making more babies.

Guys, it is not rocket science. The world economy is going to keep growing until either

A) Babies stop making more babies and we get a global negative birth rate or
B) We give up on "economy" altogether and go total egalitarian. Like Star Trek:TNG style.

 

[tomorton]

Only if you panic and got out in 2009. Those who were too dumb (or like a deer in the headlight) to get out of the market, hung on for dear life, ended up a lot better off, recovered nicely.

The dumb shareholders who didn't sell were still dumb. They had not the first clue in their heads that prices would rebound so energetically.

If you're going to buy shares you have to decide if you're an investor or a trader. The investor never sells: they take the dividend income and pass the shares on to their children who do likewise. The reason they avoid selling is to protect the assets, the asset being the dividend income, not the share.

Everyone else is a trader: traders should always sell when the market goes bearish, if only because it might stay bearish for more years than they can stomach. They should embrace selling to protect their asset, the asset in this case being the share price.

 

[Saltynuts]

The dumb shareholders who didn't sell were still dumb. They had not the first clue in their heads that prices would rebound so energetically.

If you're going to buy shares you have to decide if you're an investor or a trader. The investor never sells: they take the dividend income and pass the shares on to their children who do likewise. The reason they avoid selling is to protect the assets, the asset being the dividend income, not the share.

Everyone else is a trader: traders should always sell when the market goes bearish, if only because it might stay bearish for more years than they can stomach. They should embrace selling to protect their asset, the asset in this case being the share price.

1. An investor NEVER sells? Really? I have read a lot of books on investing and I don't think I have come across such a statement. Ever.

2. When has the market gone "bearish" such that traders should sell? Getting out at "bearish" before the market goes "bear" sounds wonderful!

 

[tomorton]

1. An investor NEVER sells? Really? I have read a lot of books on investing and I don't think I have come across such a statement. Ever.

2. When has the market gone "bearish" such that traders should sell? Getting out at "bearish" before the market goes "bear" sounds wonderful!

The definition is going to be unfamiliar but its not unique. In the 19th century, that was the majority purpose of buying shares so I'm applying an old fashioned definition, not a radical new one.

But maybe you see my logic. Buying with the intention of selling later today I am sure we would all call trading. What about buying today to sell next week? Next month? Next year? In 2030? The only difference is time-frame and its not possible to define where the line should be drawn between the two so all investors are one side and all traders the other. The only rational difference between the two that applies across all time frames is where they expect profit to arse from - sale or income.

I also think "investor" is just an industry term of flattery for a mug who doesn't want to admit they're a trader. To both of them trading sounds too much like gambling and sounds too high risk, unprofessional you could say.

Traders who hope to profit from selling shares should always exit when a bear market occurs because they cannot know when it will end. I don't say sell before a bear market, I say sell when a bear market occurs.

 

[Saltynuts]

Thanks tomorton.

I would say the line between investing and trading is a grey area. But Warren Buffet exits positions from time to time, does he not? Would you honestly say he is a "trader"?

My main question on the "bearish" comment was how do traders know when the market is "bearish" and thus that they should sell? Down 10%? 20%? And now "bearish" is "bear". Sell in the bear? When is THAT? And have you done some testing or back testing to see that whatever number or metric that is is optimal?

And your conclusion that "traders should sell in bear market as bear market likely means more down" seems to completely validate one type of trading, trend following, while completely invalidating another very opposite and by seemingly many measures just as viable type of trading, mean reversion type trading. I just dont think it is that easy.

 

[tomorton]

Agreed, its a grey area. And the guys who think they're investing fall into this confusion and think everything will be OK if you just hold on long enough. Which would be fine if it were true and if they were able to stomach the losses and if time and bills etc. didn't catch up with them.

But some bear markets last for years, and when the bear comes, there isn't a way to predict when price will get back to the starting point. From the 2015 highs it took 14 months, from 2007 it took over 5 years, from 2000 it took over 6 years, from 1929 it took 25 years.

The best objective decision is to get into cash when prices are falling. When to get into cash is a subjective decision and whatever I suggest could have holes shot in it. But the mugs reject any such plan and that's their fatal flaw, not the exit timing or exit signal.

I don't want to be rude so I'm saying nothing about mean reversion trading.

 

[tomorton]

PS: On Warren Buffet.

Most of his success, recognition and fortune has come from acquisition of dominant shareholdings, leading to Board seats and control of companies. His model isn't really comparable to any private retail trader or investor I can think of.

However, its quite possible he respects my definition by trading in some shares while investing in others. One of the features of his profile has been his success in making people think he never trades. Most of us don't have the resources to be doing what he's been doing.

 

[murray t turtle]

"Balanced portfolio". I love that. Sounds like a term brokers use to get people to keep buying more shares and more shares.

Also sounds low-risk and professional. Like calling traders investors.

%%
Also used to try + sell gov + corp bonds.Also not all go down-in a bear trend//bear market.Its like Fidelity ContraFund notes, inverse or short ETFs can go up nicely in a good bear trend. Of course a shallow or small bear move can kill one, in in inverse ETFs......!!

 

[comagnum]

"Even if you had a balanced portfolio, everything went down"

Your typical retail (long only) "balanced portfolio" works as well in bear markets as changing seats on the Titanic.

The best professional investors/traders, those that hold longer term, are either making highly concentrated bets or adjusting a long/short portfolio, sized larger in the direction of the prevailing trend.

"The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket." Jim Rogers

"Wide diversification is only required when investors do not understand what they are doing." Warren Buffett

 

[ironchef]

"The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket." Jim Rogers

Odds are if I put my eggs in one basket, it is the wrong basket.