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Compounding Gains: Cookies for Now, Ice Cream for Later…

Compounding Gains: Cookies for Now, Ice Cream for Later…

It’s June, and every parent out there knows what that means…The kids are out of school. And now, every day, I need to find a way to keep them occupied.Today, I’d planned to drop the kids off at baseball, then enjoy some quiet time to work. But surprise, surprise — as I type this, the kids aren’t at practice…One got sick. (I don’t know about you, but back in my day, we didn’t get sick in the summer.)Another broke his arm. (That happens in summer. It happens in any season with kids.)When you’re a parent, plans never really work out. Instead of enjoying some quiet time today, I’ll be watching cartoons and making cookies. Tomorrow, I’ll teach them how to compound their gains by adding cookie crumbs to ice cream.Maybe next week, I’ll take them to baseball. But who knows? Kids are unpredictable. All we can do is adapt and meet them where they are.And despite what financial planners like to say, the same is true for your portfolio…

Trading and Parenting Aren’t So Different…

Nobody can see into the future — not even financial advisors.And yet, for some reason, investment professionals say we should be focusing on our account 20 years from now.That’s a nice idea. 20 years from now, my kids will be out of the house. Okay — I hope they’ll be out of the house.But that long-run dream doesn’t drive my actions today or tomorrow. I’m not going to ignore my kids until they’re old enough to be on their own.  So why should I let my portfolio collect dust when I could be actively trading day to day?That’s why I treat my portfolio like I treat my children: with a great deal of attention.As I mentioned, I teach my kids about compounding gains by adding little cookie crumbles to their ice cream. We do that often. It keeps them happy, and teaches them about investing all at once. You see, while I do keep the long-term in my periphery, I’m much more focused on the short term in my trading philosophy. I make money on a lot of small, short-term trades, which contributes to higher longer-term growth.Sure, I could just buy and hold until the market goes up. My wealth would increase that way. But it would increase a whole lot more, and a lot faster, if I focused on avoiding the worst downturns and reinvesting my gains in upturns.Just last week, I found a bearish spread trade in Affirm Holdings (AFRM). That trade was a winner…Meaning when I saw another bearish spread trade in SPDR S&P 500 ETF (SPY), I was able to buy two more contracts with the gains from AFRM.And if the SPY trade is also a winner? You know I’ll be rolling those gains into the next opportunity I find…That’s why I focus on compounding my gains fast with short-term trading — the cookie crumbles in the ice cream.With kids, we do all we can to avoid the downturns. We reinforce the good things every chance we get. And that works better than single-mindedly focusing on something in the distant future.It’s more fun and more rewarding to live in the moment with my kids. It just makes sense to treat my portfolio the same way.

Regards,Amber HestlaSenior Analyst, True Options Masters

Chart of the Day:It All Comes Back to the Buck

By Mike Merson, Managing Editor, True Options Masters

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Want to point the blame about this market rout this year? Look no further than the U.S. dollar.Despite record-high inflation, the dollar is easily one of the best-performing assets of the year. It’s up over 11% in 2022 alone, setting new local highs that we haven’t seen since the beginning of the 21st century.And until the Fed steps on the brakes with monetary policy once again, this trend is likely to continue.We are in a risk-off market right now, so relatively stable assets like the dollar are poised to capture most of the capital sloshing around out there.When we see this chart start to turn down, that’s when we’ll know to get back into risk. But like I said, I don’t expect that to happen for quite some time.

Regards,Mike MersonManaging Editor, True Options Masters

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