It’s always a good idea to adjust your investment strategies over time. Those of you who have been following me closely know that I’ve had a real “knack” over the past 9 months or so for picking losing stocks. However, I have generally refused to let them go and have continued buying into them as the buy signals get stronger with every drop, and they became more and more attractive, with respect to all of the indicators I use to make investment decisions. And, as usual, I generally refuse to sell on “buy” signals and frequently do the opposite. I wrote about this back in March and April and didn’t realize at the time that this would become a multi-part series but I suppose that is how things are playing out for this year. Because, here it is months later and I am still fighting the downs and ups and downs of what has been a highly volatile stock market this year (most of which have been downs).
The fight continues but it appears some of the strategies I’m using are actually helping. The new strategy I am employing involves rotating out of the stocks which appear to be less favorable in nature and buying into new stocks which appear to be highly favorable in nature – even when the stocks I’m selling are carrying heavy losses. Now, many people might question such a move and be inclined to just hold the stocks long enough for a gain to be realized. However, the tax loss harvesting strategy I wrote about previously and the fact that I would stand to have an effective “gain” of about 24% based on my current tax bracket by selling these more unfavorable stocks (even if no further gains were realized in my portfolio) combined with the potential for much stronger gains by switching to much more favorable stocks, then the potential gains from here might be pretty substantial.
Is there any guarantee that the above strategy will work? Of course not. Investing is primarily about making decisions based on various indicators, the associated likelihoods, and employing effective strategies accordingly. So, at best you can position yourself for a potential favorable return, but there is never a guarantee.
I’m presently still a high risk investor (much to my dismay), but not nearly as extreme as I was back in March and April. As a result of all the buying I have done, I have moved from being a low risk investor (back in 2021) to a high risk investor. The low point for me so far this year was when I was 142% invested (yes – I was using margin) and down 41.19% for 2022 (and down 44% since September/October 2021). Presently, I am 97% invested and down 30.62% for 2022 (and down 33% since September/October 2021).
I haven’t been overly concerned with having a negative return for 2022 because all of the major stock market indexes are getting hammered this year so far (the recent lows being a 24% loss for the S&P 500 Index, a 34% loss for the NASDAQ, and a 28% loss for the Russell 2000) and even the ultimate, safe haven, low risk investment (the bond market) has gotten hammered with a highly unusual 11% loss. Eventually, the market indexes will recover and so will most of the stocks I’m holding. I would be more concerned if I was experiencing substantial losses while the major market indexes were showing significant gains.
You can read about the buy and sell strategies I’ve been using in Part One and Part Two of this series. I am mostly using the same strategies throughout the rises and falls in stock prices no matter what the cycles might turn out to be. If the stocks are dropping, I’m tending to buy more. And if they are rising, I’m tending to sell more. The only exception is the new strategy I’m currently employing where I am taking realized losses and rotating out of less favorable stocks and buying into more favorable ones.
I’m happy I’ve been modifying my investment strategies. It seems to be paying off. This is something you always want to get into the practice of doing. Observe what happens and make adjustments to your investment strategies so that you can work towards improving your investment performance over time in accordance with your risk profile. I happen to presently be a low risk investor (although right now I am temporarily high risk) but many of you will probably be higher risk investors. So, your investment strategies will probably be a bit more aggressive than mine.
You can be a very successful investor if you effectively use all of the tools and techniques available to maximize your investment returns. It’s been an interesting investing experiment I’ve been running so far for 2022. We’ll see how things go.
You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing and gain key investing insights and skills (https://brighterdayslifecoaching.com/published-books…/)
Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities/
I wish you much success in creating a brighter financial future for yourself, your loved ones, and those who follow.
Happy investing everyone!
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