When it comes to his recommendations, a well-known newsletter writer simply tells people to buy. At no particular price. With no obvious exit strategy.
And yet it’s mostly worked for him. Readers who took his advice have made decent money over the years. Because he’s brilliant at teasing out the fundamentals that turn into long-term positive trends.
But what I’ve never liked about this approach is the risk of getting in and then having to sit on a loss for months or even years in the hopes that a trend will work out in your favor.
Who would want that?
I used to think that patience was the price of admission. Then an experience changed my mind.
They said it was “safe.”
I first got into GDX—an index fund of more senior gold miners traded on the New York Stock Exchange—in 2012. After a sharp runup in 2011, the market had sharply corrected. I was told the fundamentals were strong for a recovery. So I bought in, not giving much thought to “silly” things like protecting the downside.
At the time, my analysis abilities weren’t great. I really only bought because people better informed than I said it was a good idea.
And fundamentally, they were right. They still are.
But we’re still waiting. Because the price hasn’t even come close to what it was in the summer of 2012. Even though the price of gold has broken through its previous highest price.
Now, there are plenty of reasons for that. And yes, it does look like things are starting to turn around…finally.
But, I could have saved myself money if I had got in at the right time, at the right price and protected my downside in case the price moved against me.
That’s easier said than done, I know.
I started my career in the digital marketing field way back when Pets.com ran Superbowl commercials.
Over the years, I developed expertise in something called “direct response,” which happens to be the sort of marketing used by most investment newsletter publishers.
And because of this experience and my interest in investing, I started working with some of the largest publishers in the field as a copywriter and marketing strategist.
This exposed me to thousands of recommendations by dozens of analysts over dozens of publications.
Most of these analysts used a slightly different approach. Some looked at the fundamentals. Others at the technical side of things. Some mixed the two together.
But something that was pretty common to everyone was this:
- >> Most of them struggled with the timing.
They could identify a good investment. They could make a really strong case for it. But then they’d buy in and the market would drop.
They’d then have to decide whether to wait for it to come back, or sell at a (sometimes substantial) loss and try again.
So how do you time your timing?
It starts by first understanding that even the best of us can’t hope to time any market perfectly. Doesn’t matter whether that’s stocks, real estate or cryptocurrencies.
Or whether they are on or offshore.
But we can stack the odds in our favor by setting things up to minimize loss and make hay while the sun is shining.
Here’s our process:
Identify the market’s belief systems that create the conditions for a positive timing event.
Watch the indicators that demonstrate the conditions are being met.
When we see the conditions being met, take a position that gives us the greatest probability of riding the price up.
Have a good exit plan if the price moves against us.
This is easy to do in the public markets – we just analyse the trading volume at different prices at different scales.
Then it’s a question of probability: Based on certain volume patterns, it’s more likely that the price will move one way than it is that the price will move another way.
If the price doesn’t move in our favor, we use a stop loss order to minimize our loss. This lets us reuse our capital for something else.
In other asset classes, we often don’t have the liquidity or the data to time things so cleanly. But that’s not to say we can’t apply the same fundamentals.
Whether on or offshore…