So… Today, in the stock market, I decided to sell my remaining shares of the XIV ETN which I started selling last week (the XIV ETN essentially bets on a fall in volatility). It gained a little over 4% today and has gained a phenomenal gain of over 23% in the past seven days which is nearly a three and a half year gain on average. The stock still appears to have some room to run, but the indicators that I generally look at indicate that the risk-reward is becoming a bit unfavorable. So it probably made sense for me to go ahead and sell instead of taking additional risk for what might amount to be a marginal gain.

Part of being a disciplined investor, and realizing consistent gains over time, involves recognizing solid gains when you see them, taking actions to capitalize on them, and patiently waiting until the next compelling investment opportunity arises; one where the risk-reward becomes favorable for you according to your risk profile. If you operate in this fashion you will experience much success as an investor. And if you need any help with making any of these determinations, you know who to ask… Have a wonderful Monday everyone!

So… The strangest thing happened in the stock market Friday… I was getting ready to sell my remaining shares of the XIV ETN which had gained nearly another 2.5% (for an overall gain of about 16% over a period of a couple of weeks – well over a two year gain on average). Well, as soon as I was getting ready to sell the stock rapidly dropped. It lost about 5% in a matter of minutes! So I then decided to pursue the other side of the trade; being a buyer instead of a seller. A number of times when a stock drops rapidly it falls to such extreme levels due to the fear it generates that it bounces significantly. So I decided to put in a purchase order at a ridiculously low price, because you never know… You might just get it. And if I didn’t I could always monitor the situation and adjust my price upwards if I so desired. Well, as luck would have it, the price dropped another 5% down to the price I had made the purchase order for and I bought the shares. By the end of the day the shares rebounded and I sold them for a 6% gain which is nearly a one year gain on average in a matter of hours! No, I was not going to turn down a gift like that! In the world of investing it is not very often that you can time something as beautifully as this. So I decided to take the cash and run. I will now wait patiently for the next compelling “buy” opportunity to put this cash to work.

This is one example of why it’s good to not always be fully invested so that you have cash available to be able to capitalize on opportunities such as this. You never know when these opportunities might arise so you always want to be prepared by periodically raising cash; rotating out of investments which become less favorable such that you can take advantage of investment opportunities which become favorable over time. You won’t make winning investments all of the time, but the point is to use strategies and techniques which allow you to make winning investments for much of the time.

So… That’s where things stand for me in the stock market right now… Have a wonderful Sunday everyone!