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In the world of investing, being called a bag holder is one of the biggest fears that individuals have. The image that word brings up is a person holding two (or more) bags with big fat dollar signs on them, but they are empty. The implication is that there was once money in those bags, but it is all gone. Being a bag holder means you are left holding the bag. You bought at the top when the "smart money" was selling. This fear prevents many investors from buying stocks that are close to or at highs. But is this something that investors should really fear? If you take a step back and look at the recent history of the markets you can see that we continue to make new highs, but it takes time. Along with being called a bag holder, investors have other fears of buying the top, but let's take a look at why they are often unfounded fears. Pundits Cry to Sell We have all heard the wisdom from the idiot box. The pundits tell you that stocks are over-valued and it's time to sell to protect your gains that you have already made. "Run for the hills" they decry as the market starts to look scary. Maybe you have read those research reports that told you to get out of the market. I remember one from not too long ago that stated "sell everything that isn't nailed down," and a small self-fulfilling panic did cause the markets to drop initially, but as we now know, a few years later, it was the wrong move. The pundits are quick to call for investors to dump everything as those calls can really change a career. Remember the last person to "call the crash?" Elaine Garzaelli made a career out of her infamous Black Monday call, so who wouldn't want that kind of notoriety? If it bleeds, it leads, and whatever gets the buy and hold herd to click on a link is going to get published. But Growth Is Over...Or Is It? Year after year we hear the same thing over and over again. It comes in different forms, said many ways, but the message is always the same. One way or another, the fear mongers want you to lose your faith and sell what you hold. They say that growth is over. They say that there is no innovation in the market place. They say that consumers are exhausted. The truth is, they have been wrong time and time again. The economy will almost always have pockets of growth, the trouble can be finding it. Innovation is all over tech and biotech, but again, you have to work to see it. The consumer...well the consumer is not to be bet against. So why do the fear mongers always grab the headlines? The simple answer is that the pundits need to drive activity. The act of selling forces you to think about buying again down the road, but with commissions running to zero there are other reasons. Ever notice how most of those calls come at the end of the year? A lot of brokers and money managers want to protect the gains they have so moving to cash is the best way to do that. Then when they are ready to get back in, they are hoping the fear mongering will pay dividends by lowering stock prices. More . . . | ||||
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| That Old Adage Over the years you heard truism of Wall Street. That old saying we all aspire to: Buy Low and Sell High. As much as anything, it is a punchline to a joke more than a way of life. Now I am going to tell you the truth...IT IS A JOKE! How many times can you really say that you bought low and sold high? If the answer is north of 75% then you are either a novice or a liar. Even the best money managers have a win rate approaching 60% so don't feel bad about it. The point is, we have been trained to try to achieve the impossible. Instead of trying to time the market, those that bought high and sold higher were the ones making the real money. They didn't let the fears that stop so many of us hold them back from their goals. Over the last several years, buying the top of the market has been a winning strategy. Sure there are pullbacks, but are you really that good to say you can time the market? No one can do that with any regularity, but those that weren't afraid and got long did better than those waiting for the perfect entry point. Here's The Rub No one wants to be a bag holder, but it happens to everyone. We, as humans, make mistakes. The unforced errors are the ones we have to eliminate. Often times, however, the pundits push us to make those errors by trying to get us to time the market instead of playing the long-term game. There is growth out there, you just have to work to find it and when you do, don't be afraid to buy high...just make sure you sell higher! Position Yourself for Profits A lot of these ideas are the basic foundation for what I do with a stock-picking service called Zacks Home Run Investor. I look for small to mid-cap growth names that have big potential, and I leverage the power of the Zacks Rank (earnings estimate revisions) to help us take that all important first step forward. All day I look for winners and more often than not, I find them. The portfolio has recently closed gains such as +58.0% and +83.7%. Since its 2011 inception, it has scored more than 100 double and triple-digit gains.¹ Here's one more reason to look into Home Run Investor right away. You may download our just-released Special Report, 7 Best Stocks for the Next 30 Days, free of charge. Of the current list of Zacks Rank #1 Strong Buys, our experts predict that these 7 will break out the soonest. These short-term trades balance out the longer-term home run picks. Don't miss out. Your chance to download the free report ends Sunday, November 3. Check out Home Run Investor and 7 Best Stocks Now » Good Investing,
Brian is our aggressive growth stock expert with a reputation for double and triple-digit gains. He is the editor of the Zacks Home Run Investor. | ||||
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| ¹ The results for the companies listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through September 2, 2019. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank # 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
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