$10K to $700K — Results You Won’t Get Day Trading
This is at the heart of Bold Profits investing:
Investing in the stock market is not for the faint of heart. It takes grit, gumption and fearlessness. Investing is very volatile. One day your portfolio positions are up, the next day they’re down. The right stocks can help realize gains of hundreds, thousands or millions of dollars, while the wrong stocks can dole 100% losses. It’s a gamble.
The amazing Amber wrote this, and I have her on my Bold Profits Daily today to dive in deeper.
Lock it in your memory.
But know this: You will not win by sitting on the sidelines.
One study even shows how holding Strong Hands could have allowed you to turn $10K into nearly $700K … not by jumping in and out of the market, but by staying IN.
You see, we believe in BIG money over time. NOT day trading…
That’s how Profits Unlimited readers scored a top 736% in 67 months with STMicroelectronics (STM) through volatility. Get the strategy details here.
See our full video and get the five MUST-HAVE rules before you buy another stock:
Paul Mampilly: Hey Amber!
Amber Lancaster: Hello Paul!
Paul: This is going to be a special treat. You are showing up on my Tuesday video for our YouTube channel. Welcome. Usually our positions are reversed. Thank you for coming on.
Amber: You’re welcome. Thank you for having me.
Recap Of Amber’s Article
Paul: The reason I wanted to have you come on, beyond you being incredible and fantastic, is that you wrote an article that I think is timely for our readers. Many folks may have missed it because they are not subscribed to our free e-letter, Bold Profits Daily.
There will be a link in the description below if you want to subscribe to it. Your article got to something we talk about all the time and is our hashtag, our motto: Strong hands. You laid out something that would have never happened for our readers without those strong hands.
The headline is that STMicroelectronics (STM), which I want to add was the very first stock added to Profits Unlimited, it was the Internet of Things (IoT) stock that was associated with the promotion that built our business. We finally closed that trade out more than 5.5 years later.
So nearly 67 months later. There’s a reason why I am breaking this down into months. We’ll get to it in a bit. STM had a 736% gain using this strong hands strategy. I want to quote what you wrote because I feel like it gets to the heart of what we do, how we do it and big money over time.
That’s what we’re pursuing. You wrote, “Investing in the stock market is not for the faint of heart.” This is true. Look at any stock price, stock chart or market index, it is a series of ups and downs. Then you went on to write, “It takes grit, gumption and fearlessness. Stock investing is volatile. One day your portfolio positions are up, the next day they are down.”
“The right stock can realize gains of hundreds, thousands or millions of dollars while the wrong stock can dole out 100% losses.” It’s a gamble in the end. This is why we keep harping on the Profits Unlimited updates about Rules of the Game.
Tell folks about the research in this article, why you wrote it, how it can be of help. I read the salient parts that hit home. Go through some of the evidence cited in here.
Let’s Compare The Charts!
Amber: The first thing we can cite is this particular Bloomberg comparative return chart.
It lays out the gains for various major indices. I went back to around 2002. You will see it lists the Nasdaq, Russell 2000, the Dow and S&P gains.
The Nasdaq pulled out a total return of more than 800%, while the remaining indices had gains of 400% and nearly 500%. It just shows that, over time, money can be made when you invest in broader markets, but they key point is that during the financial crisis of 2008, the Nasdaq saw a decline of 56%.
It lost 56% of its value. People who were shaken out of the market during that time, if they had remained and rode that market up, the gains would have been astronomical. They key is, there are going to be downturns where you will lose money, but holding on you will receive gains on the other side.
Paul: I can tell you markets don’t crash. Markets don’t go down. They don’t happen by some magic process. It happens as a result of people logging into their accounts and pressing the sell button. It does not happen by accident. It doesn’t happen by a magic moment.
It happens as a result of human intervention. Oftentimes what happens is that is driven by fear that is commonly felt among a lot of people and is transmitted by the media. How else would you know about it? You are not talking enough to fellow investors to get this fear from one person to another.
What is making you check your account on that day? Fear. How are you getting that fear? It’s being transmitted by the media that is taking some piece of news and making it so emotional that you feel like you can’t resist. You log into your account, track it for a while and then sell out.
I know from tracking this that the vast majority of people who sold are still not back in. There are people who track this. People are still not in. Why? Because once you get out you put yourself in the mindset of being out. You focus on the negative and what went wrong, which is in the past.
The markets are always about the future. Let’s keep going on some of the evidence you continued to cite, including this Fidelity Investments study. It’s astonishing. You would never think this is true. Tell people about this study and what they found.
What Is The Fidelity Investment Study?
Amber: Let’s put up this graphic. It’s the results of Fidelity’s study.
They did a hypothetical study between the years of January 1, 1980 and March 31, 2020. They looked at how $10,000 invested in the S&P 500 would have performed during this time.
They found that those who invested all the days of market — they rode it out and held all the way — turned $10,000 into $697,421. Missing just 30 of the best market trading days during this same timeframe would have turned a $10,000 investment into a smaller total gain of $115,000.
That’s a difference of $581,000. That’s just 30 days of getting out of the market and not getting back in you would have lost nearly $600,000.
Paul: This is an astonishing chart. What’s written about the most are people on social media pointing to one-day gains, they are rarely showing you their losses. The vast majority of people who make big money in the stock market do it over time. This points to that.
You have to stay in. We cannot tell you which days are going to be the best days. Can you tell which? You can’t. I know we have exchanged a research document that says oftentimes the best days come after the worst days. That addresses two issues people will throw at me.
“If you sold, you would have saved losses.” Well, the best day often follow shortly after the worst days. Once you decide to sell, I think it’s going to be one in a billion that can turn around the next day and go all in at the low price. I think that’s a bridge too far for the vast majority of humanity.
What do you think, Amber?
Amber: I would say so, Paul.
Paul: You would have spent all your time persuading yourself to sell everything.
Why Should Keep Your Strong Hands?
Amber: And you would have lost out. In the Profits Unlimited portfolio, you have a great example of this with STM. When you put that position in, I have another chart that shows STM over the previous five years just before you recently sold it for that 736% gain.
Check out this chart. It’s a roller coaster.
One decline was as great as 54%. Holding on with those strong hands and being BOP — bullish, optimistic, positive — people today who were with you at that time now have fantastic gains to tout.
Paul: That chart is amazing. Having had STM in the portfolio and needing to make the decision that we are going to stay in, from my side it’s something I have to determine based on my understanding of what’s going on in the sector, STM’s business, and the demand and supply balance of the stock.
People think just because you understand a business, it will give you the answer as to whether you should buy or sell the stock. That is not my experience. Sometimes the stock market can discount years and years ahead of future growth. Sometimes the company can be growing for many years and the stock will do nothing.
There’s always a judgment call there. In this case, I determined after 2008 there was going to be pent up demand for STM’s businesses that were going to generate revenue growth and that its stock was largely in the hands of people who truly believed in the company and they were not going to sell it for anything near its price.
When we put it in it was $6. It was a controversial stock. People hated it. You can go online and see people called me a scam artist and a fraud for recommending it. We connected the idea of holding with strong hands through crashes like the 2008 crash. Then the idea that you have to be in to experience the best days in the market.
They come unpredictably. Then when you subscribe to one of our services you have the idea that we have some ability to deliver returns that are better than the market. Otherwise, you should just invest in the S&P 500. In other words, our stock selection over time has to be better or provide some benefit.
What we are going for across our services is we believe the primary bull market of today is growth through innovation. That’s the two scarcest things: growth and innovation. We simply have not had very much of it for 20, 30, 50 years. We believe if you are invested there you can generate huge returns.
It does mean there is a roller coaster. Today we are at one of those low points in the roller coaster. As a result of that, we get a lot of emails. Talk a little about connecting that to the Rules of the Game.
Rules Of The Game!
Amber: If you are not aware, Paul has written a fantastic free report called “Rules of the Investing Game.” We will include a link.
The number one rule he has is to set up your America 2.0 portfolio the right way. You don’t want to ever make an all-in bet. That’s number one.
Number two is that it’s best to equal weight your positions in your portfolio over time.
Number three, you want to build your positions over time. Meaning, you don’t want to dump your money in all at once, but put a little in overtime. Maybe over the course of a few weeks or months. Just spread it out.
Of course, here’s a key one I like to hear: Take profits on the way up. When a stock is going up that’s when you take money for other purposes. It’s a means to an end. You can use it for something you want in your life.
Lastly, you have to keep cash on the side. If you don’t, on down days you will feel a stock decline. With cash on the side, you have that protection there.
Paul: This is the key one that the folks follow. Keep cash in your actual account. Your Fidelity account, E-Trade, Robinhood, Vanguard account. You will see if you keep cash there is a natural weighting effect. As our stocks have declined, the weighting of cash has increased.
If cash was a 20% position in your portfolio, today it is probably 30%. If you are brave enough and feel like it, you might even take some and see Zoom is 70% lower than its peak or Teladoc, maybe you’ll buy some of it. Keeping this cash is counterbalancing.
We call it an emotional security blanket. My experience is that people sell out of fear. Most people do not follow the markets enough, companies enough, sectors enough, to really be making informed judgments. They react to what their friends and family are doing, what they hear from the media or what they feel in their hearts.
Amber: It shouldn’t be that way. We are always looking forward and always looking ahead. The technology on the horizon is truly mind-blowing. We are in those investments that can realize these potential gains. That’s where we always have to look: straight ahead and over the horizon.
Why You Should Not Put All Your Money Into Just One Stock
Paul: One last thing before I let you go. One of the things we get our spiciest emails about is people will call us out on single stocks. “Paul, you told me to buy this and I did and it’s down. You are a jerk, a scam artist, a fraud.” A lot of accusations come.
One of the things I don’t think a lot of people understand is that the S&P 500 has 500 stocks in it. Our portfolios have a maximum of 50 stocks. In the S&P 500 right now, how many stocks do you think relative to where they were last year in a loss position? What would you think?
Amber: For the S&P 500 it could be about 50% or more.
Paul: I actually saw an article in my weekend reading that more than 35% of the Nasdaq Composite is more than 50% below its previous high. It means if you are making one stock bet or just judging us on one or two, you are giving the benefit of the doubt to the S&P 500 to 500 stocks which is being carried by six positions.
Then you are expecting us to get every single stock right. We are never in a lifetime, not in infinite lifetimes, ever going to meet that standard. It’s why we come back to Rules of the Game. Never make an all-in bet on any one stock or truthfully even two stocks.
If we are wrong and this is one of the stocks we have made a timing error on or gotten it completely wrong, then we get spicy emails. It’s why it’s so critical to understand that we are in for the long term and you have to follow Rules of the Game.
Any last things you want to say to reinforce what I think is a fabulous article? Thank you so much for writing it. I think it’s the kind of article that’s a real service for our readers. Please read it. Any last thing to say?
Amber: Please stay strong. Stay with your grit, stay fearless. Yes the markets can create emotions and fears, but if you have a long-term investment goal it’s a great way to make money over time, especially in Paul’s America 2.0, Fourth Industrial Revolution stock picks.
Paul: Thank you, Amber. We think this is an incredible time to be alive. There is so much that’s changing. It’s going to create new ways of doing things and massive wealth for you. However, it’s not going to be every day. It’s not going to be instant. It’s going to be over time.
I want to echo what Amber said and say to be strong hands, be BOP. Amber, it’s a great honor to have you on. Thank you for coming on and writing this article. Everyone should read it. I’ll be back next week. Amber, you want to say goodbye first.
Amber: Have a great week ahead everyone. Bye bye.
Paul: This is Paul saying bye.
Editor, Profits Unlimited
Wait! Before you go: Paul believes one of the winners of the next wave of America 2.0’s bull market will be 3D printing. And our Twitter audience agrees!
To see why and his 3D-printing stock recommendation, check out this presentation.