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Being Bearish Is Not Profitable

Being Bearish Is Not Profitable

It’s easier to find financial experts views that are extremely bearish than it is to read bullish views. Since 2009 it has not been profitable to be bearish, and yet these smart economist have been calling for a crash. A broken clock is right twice a day and when the next bear market happens all the economist that where bearish will be right.

There are soooo many reasons that the market shouldn’t be hitting new highs.
Valuations, all the crap in Europe/Japan/China, Trump, rising interest rates, tapering QE, natural disasters, Rocket Man blowing countries up, and that’s just a few.

If history repeats, we will eventually see a bear market and a recession. A recession is typically defined as a decline in GDP for two or more consecutive quarters.

 

US Recessions (1945 to Present )

Recessions/GDP Contraction/Length to next
                                                            Recession
Feb 1945-Oct 1945      -12.7%            3 years, 1 month
Nov 1948-Oct 1949     -1.7%              3 years, 9 months
July 1953-May 1954     -2.6%             3 years, 3 months
Aug 1957-Apr 1958      -3.7%             2 years, 0 months
April 1960-Feb 1961     -1.6%             8 years, 10 months
Dec 1969-Nov 1970      -0.6%             3 years, 0 months
Nov 1973-March 1975  -3.2%             4 years, 10 months
Jan 1980-July 1980        -2.2%            1 year, 0 months
July 1981-July 1982       -2.7%             7 years, 8 months
July 1990-March 1991   -1.4%            10 years,0 months
March 2001-Nov-2001  -0.3%              6 years,1 month
Dec 2007-Jun 2009        -5.1%              ???????????????

Average: 11 months   -3.2%    4 years, 8 months

 

My Portfolio

Since early 2017, I have been on the sidelines scratching my head as the equity markets have been going up. I have been holding more cash than I would normally. I haven’t sold anything I just haven’t purchased anything new and have been keeping my distributions in cash instead of reinvesting it. (Not smart).
I am obviously not very good at timing the markets. Not that I am really trying, I thought I would wait to see how the new Trump administration would do, and then it was summer and you know the saying “sell in May and go away.” The Fall usually is fairly volatile with big swings in the market.

I’m now looking at investing the cash we have in our portfolio when the market is hitting all time highs. We have a long time horizon and timing the market is absolutely pointless. What’s really important is saving regularly, diversifying, keeping cost low, and stay invested.

 

Don’t wait for retirement to enjoy life !!

Word Of The Week Diversification

 

 

 

 

Investopedia Definition

What is ‘Diversification’
Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.
BREAKING DOWN ‘Diversification’
Diversification strives to smooth out unsystematic risk events in a portfolio so the positive performance of some investments neutralizes the negative performance of others. Therefore, the benefits of diversification hold only if the securities in the portfolio are not perfectly correlated.

Studies and mathematical models have shown that maintaining a well-diversified portfolio of 25 to 30 stocks yields the most cost-effective level of risk reduction. Investing in more securities yields further diversification benefits, albeit at a drastically smaller rate.
Further diversification benefits can be gained by investing in foreign securities because they tend to be less closely correlated with domestic investments. For example, an economic downturn in the U.S. economy may not affect Japan’s economy in the same way; therefore, having Japanese investments gives an investor a small cushion of protection against losses due to an American economic downturn.
Most non institutional investors have a limited investment budget and may find it difficult to create an adequately diversified portfolio. This fact alone can explain why mutual funds have been increasing in popularity. Buying shares in a mutual fund can provide investors with an inexpensive source of diversification.