What is a market ninja?
Hi,
Have you ever seen the movie The Pianist? It’s a highly awarded movie about a jewish musician’s survival in nazi-occupied Warsaw in the years 1939–1945.
When I saw the movie I was puzzled by how at the start the protagonist and his family see things getting really bad around them and yet keep staying put hoping for the better, that some external force will save them. They seemed to be well off so it was a puzzle to me why not choose to go somewhere else as some of their friends were doing.
This is the danger of becoming comfortable. We refuse to accept that things can change fast and for the worst.
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Earlier today I was reading some financial articles expecting markets to return to normal, meaning that mixed asset type portfolios are expected to perform better in the coming decade and more.
This is based on historical data and observations on what portfolios perform best with 10, 20, 30 plus time horizons.
A super important detail if you are aiming to create these types of portfolios is that your focus needs to be on your reallocation strategy. Often articles forget to mention these details so one could think that these strategies are of a set and forget type. That is far from it.
But what is normal?
There is no such thing.
The market changes all the time. When we look back and try to learn we identify patterns. Then we read stories and recounts which are usually from the winners that managed to predict correctly.
This could make us think that there are certain correct ways to invest and that sometimes the market is just against you.
It makes for a comfortable excuse when a preferred strategy is not working.
It is much healthier and profitable to simply expect that the market is never normal and that something unexpected will always happen.
We know that history moves in cycles and subcycles of alternating prosperity and hardship. Since the financial crisis of 2008–2009 stocks have been on a looong bull run which is why indexing the S&P 500 and selecting and holding proven stocks forever have been popular recommendations.
Expecting this situation to last forever would be unwise.
This is why I recommend thinking in terms of trading windows, personal lifestyle and routines to figure out what is the smartest way to invest.
To me it makes no sense to subscribe to ideals like “stocks will always go up in the long run” or “bonds should be at least 40% of the portfolio”.
Each ideal has its right times in the market, which results in a lot of people blaming the market when the strategies don’t work out.
Good for online soap opera. Bad for our pockets.
What wins is being nimble and knowing how to invest in a variety of asset types.
Staying in tune with the market and sensing when things are changing.
Not blaming the market, but blaming ourselves so that we can learn and improve.
Learn to invest in stocks, bonds, gold, market indexes, ETFs, cryptocurrencies. Small caps, large caps, maybe even penny stocks and shitcoins to really put into practice your risk management skills.
Have you fallen comfortable with only one asset class or are you a nimble market ninja?
Have a good one,
Chris
Originally posted 1st December 2023 on ElliottSays.com
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