No matter what your time frame, there are periods when the market is in an uptrend and periods when it’s in a downtrend. However, all I ever hear from the media is “Be in the market!” When you study history, you realize how brutal the market can be at times. In fact, the more I study it, the more I realize: THE LESS YOU ARE IN THE MARKET THE BETTER.
Buy and Hold to me is just wishful thinking. I’m not trying to insult long-term investors, I’m simply saying that I don’t want to be in the market when it corrects 30 percent or more because it takes forever to recoup your losses. When you go back and look, you will notice TONS of huge corrections over the past 30 years, even during the cyclical Bull Market from 1982-2000.
When the market corrected this past summer, many people asked me: “What do you like?” I told them: “Nothing, I’m in cash.” The common response I got was a look of confusion. It’s as if the concept of sitting out of the market is foreign to people. It’s actually pretty simple to me. When the market is going down most sectors are going down with it.Why try to find the "needle in a haystack" Sit it out and when the market starts going back up you get back in. (Like now)
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I could go on forever writing about this misconception, but I will leave you with this final thought. I think most people agree there are periods when you shouldn’t be in the market, but they don’t have the skills to identify those times, nor do they have the conviction to raise cash because they might “miss out” on the next rally. Therefore, most people just stay in the market because it’s easier that way, and it doesn’t involve making difficult decisions. Then when the market is down 20-30 percent and their just hoping to get back to even, they wish they had gotten out.
I challenge you to get educated on this topic because it might save you a fortune whenever the next major correction comes along.
