Embrace Volatility for Best Performing Stocks
Sometimes, no matter what’s happening in the market, people end up with mediocre returns on their stocks.
People fear volatility.
Because of this fear, they end up with funds and investments that deliver mediocrity.
But I have one thing to say to you, Strong Hands Nation: Embrace volatility!
Check out this week’s video to find out why embracing and accepting volatile markets can lead to better performance, and how you can get started today:
Stock Market Illusions & Mediocracy
People who are investing their 401k or even people who have a good amount of money have this illusion that you somehow have to accept mediocrity. In other words, everyone needs to accept what the market is. For folks who are new to investing, there are things that are referred to as “the market.”
The most commonly used reference for the market is this index called the S&P 500. It has 500 companies that are traded in the United States. It is led at the top by Apple, Microsoft, Facebook, Amazon, Google, etc. If you go through time that top 10 changes depending on what is going on in the world and the economy at that moment.
Over the last 20 or 30 years, people who are called stock pickers or people who managed money have never been able to outperform the index. So it became the thing to do where people allocated all their money to the S&P 500 in terms of stock market investing.
Now there was this enforced mediocrity. It was offered and embedded into all kinds of products and services. People who are in 401ks, you might have something called a Life Cycle Fund. They own the S&P 500 and the stocks in it.
The other way there is also mediocrity is where people are pushed to asset allocation plans where you are forced to invest in bonds which generate almost no interest. Or you are forced to buy into cash that pays virtually zero interest.
Underlying it, and this is the central thing I want to bring up in this video — I doubt it’s going to be popular — whether it’s pushing everyone to buy the S&P 500, pushing bonds or cash is to avoid volatility. In other words, the stock market goes up and down.
There are crashes and big moves. There are bear markets. All this is designed to avoid volatility. There is this enormous fear that grips people when it comes to volatility. “Oh my goodness, everyone else is selling so I should sell,” because that is what is happening in a crash.
That is what is happening in a correction. Some number of people think if this news is understood other people will start to sell. So they start selling. That, in turn, drives other people watching the selling to join them.
Then you have all these things that people use: trailing stop losses, stop losses, various types of quantitative types of trading. Then people use options and futures to hedge. So there’s this snowball of trading activity that creates the volatility that people are so desperate to avoid.
That then feeds you back into the Wall Street machine that gets you into the S&P 500, bonds, cash, asset allocation, etc. I am not suggesting this is a conspiracy that is being deliberately done. It has worked out this way where the fear of volatility, the desire to avoid it, now acts like a convenient conduit to constantly generate mediocre results on your behalf.
Today I believe it serves the purpose of Wall Street and the people who provide you with Life Cycle funds, mutual funds or index funds that you continue to fear volatility. Anything that is an alternative, like what I do and what our services do — we offer stock picks, ideas, general guidance in terms of investing in it.
They would like you to believe that’s wrong for you. They will say if one stock is wrong it could go down 30% or you might experience a lot of volatility. This is all 100% true. What I would tell you is that the way to escape this prison of mediocrity associated with the S&P 500 and asset allocation is to embrace it.
Embrace Volatility to Become a Successful Stock Trader
Embrace it completely. There is risk in the world. There is no avoiding it. You can embrace it in two ways. You can go with what people are using, which means you get single-digit returns year after year. Or you can say, hey there’s risk out there but there are always ways to use ideas where you can generate significant returns.
For example, in Profits Unlimited, my flagship service, it’s a multi-cap service. In other words, we have stocks that have a stock market capitalization of as low as something in the low billions all the way up to hundreds of billions. We have been able to annualize at nearly 30%.
That’s almost double the S&P 500. It has been volatile. You definitely had to sit through crashes. You had to sit through corrections and volatility. Nonetheless, if you are annualizing at 30% or even 25% that difference between the S&P 500 or asset allocation is so great over five, 10, 15 or 20 years.
It’s going to amount to a lot of money. To me, it’s well worth while to endure through that volatility and embrace it to get superior returns. For some people that may be inappropriate. Maybe you are older and you need income. Maybe you dislike seeing that kind of volatility.
In truth, Profits Unlimited and our services may be inappropriate for you unless you are willing to make it a small slice of your portfolio where you are willing to see it go up and down all the time.
The other takeaway is that it is absolutely impossible, unless you are willing to endure through volatility. You can look at any major, big investor and no one has been able to make all their money as a result of making perfect decisions on trades day after day.
Nobody has made their money that way. Warren Buffett famously said his ultimate timeframe was forever. I can tell you from my experience of working on Wall Street that all the best investors have a multi-year timeframe in terms of experiencing success.
Our services are often compared to Cathie Wood. I can tell you she holds on to stocks for years and years. She built her Tesla position over a number of years. She has outperformed the market no different than ours as a result of embracing volatility, enduring through it and having a portfolio.
The third thing I would say is that many people try to marry our ideas to their way of doing things. They end up frustrated because they end up buying, then they go through a period like we are now where growth stocks aren’t going up every day or every week.
Then they are frustrated and want to go in and out of it. It does mean you would need to change the way you operate. At least in terms of the selections you use with Profits Unlimited or other services. The number one thing is you have to lengthen your time horizon to a minimum of one to three years.
We have definitely seen big gains show up in that timeframe. For example, in our small-cap service Extreme Fortunes we had a stock — Plug Power — that went up 1,100% from the time we put it in the model portfolio to when we sent out the sell trade.
1,100% in three-and-a-half years. Those kinds of gains are possible. You are not going to get them every day or every year. In that same service, we also have multiple stocks that are still open that have gains of 600% or 800%. Having that longer time horizon allows you to get the benefit of these big gains.
We have big gains as well in Profits Unlimited. It has the same timeframe. Tesla is up more than 1,000%. Our very first stocks, STMicroelectronics, is up hundreds of percent. We have other stocks in there we have held for long periods of time with large gains.
The second thing that you would need to do to experience success and avoid mediocrity is you have to have a portfolio. You have to have a minimum of stocks, but I would say 10 stocks is better. You want many ways to win.
You also want stocks that allow you to dampen the volatility associated with any single stock. A portfolio gives you that. I know this is a video that is trying to continue in a series of videos to point out who we are, what we do and who we are right for. Should you waste your time watching this channel?
Should you consider subscribing to our services? What I find is that the vast majority of people are looking for day trading advice or short-term trading advice. There are people who do that very well. People who trade daily are looking for small gains and looking for them to come quickly.
We do not offer that. What we do is focus on big, massive megatrends, look to identify them early, look to find the leading companies and position ourselves ahead of the big money coming in to bid them up. Today the big money is trillions of dollars.
If you are buying a company when it’s worth $5 billion, $10 billion, even $50 billion, it’s a long way to get to where Apple is today at $2 trillion. There’s a lot of upside. Our goal is to try to position ourselves before the big money comes to bid the stocks up.
That way, when they come in and bid the stocks up those represents gains to you in your portfolio. That is what we are seeking. Hopefully you are able to learn about what I do and our services do.
Editor, Profits Unlimited