The market is down.
Everything is red.
The end of times is near!
…even though the SP500 traded yesterday at the same price as mid October.
Look, I get it.
If you don’t have a process you might feel a little stumped.
But here at Fink, we LOVE seeing the price drop.
Why?
Because we exit on the downside - using objective volatility measures - and not at upside price targets.
Look, we aren’t arrogant enough to think that the market will stop just because we think the share price has hit $150.
So what do we do?
We take profits as the position falls against us.
Sounds weird right?
Sure - but we invest in momentum as a factor.
We don’t really care about much else, and if momentum is ebbing out of the market, by taking little chinks of our profit out, we’re allowing ourselves the most optimal chance of keeping our position on if the market ticks up again (which generally happens over the last 30 years of data) while also banking in case it doesn’t.
And guess what?
If it does start ticking up again, our momentum model will provide a signal which lets us get back in!
It’s not easy, but it is simple, and once you do it enough, you learn to trust the fundamental basis of the US stock market - that they LOVE profit and in the future will likely make more of it, leading to a higher share price again.
Systems prevent anxiety.
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