I invest in a simple way…
I’m willing to concede a few battles to win the war.
This is a simple idea. Unfortunately, most investors can’t do it. It goes against our egos to simply admit that we might be wrong and move on. We think we need to be right EVERY SINGLE time.
What’s the war we’re trying to win? Growing our net worth.
And to grow your net worth, you have to start by knowing that you are NOT going to win every time in investing. It’s not going to happen…
You are going to win some, and you are going to lose some. Let me repeat that last part: You are going to lose some.
You need to be OK with this.
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Knowing that you are going to lose some, you have a simple mission: You must take steps to make sure your winners are larger than your losers.
This is where nearly all investors fail. But that doesn’t have to be you…
I turn it into a simple math problem… I make sure my losers stay small by cutting them early. And I let my winners grow.
It’s the old saying… “Cut your losers and let your winners ride.”
Let’s take a quick look at some easy math so you can see how important this is…
Let’s say you made three consecutive trades. By the time you closed out, the returns were: -10%, -10%, and +100%.
How did you do? You might think that you did poorly… Your median return was -10%. That sounds terrible – no question.
Also, you were wrong 67% of the time. That sounds bad, right? Who wants to lose money on two out of three trades?
But I would take these three trades any day…
Here’s what really happened: In this scenario, $100,000 invested would have turned into $162,000.
You would have made a 62% return on these three trades. And that holds true regardless of the order you placed them in…
Your $100,000 would have turned into $90,000 after the first losing trade, and then $81,000 after the second losing trade. Then it would have doubled to $162,000 after the winning trade.
Flipping the order around gives the same result: $100,000 would have turned into $200,000 on the first trade… Then it would have fallen to $180,000, and finished at $162,000.
How does turning $100,000 into $162,000 in three trades sound to you? It sounds pretty good to me!
All it takes is cutting your losers early and letting your winners ride. You made sure your losses stayed small… And you let your winner ride all the way to 100% gains.
So, thinking about your typical habits… how do you trade? Do you cut your losers early and let your winners ride?
If not, then it’s time for a change. You need to realize that it’s OK to lose some battles on the way to winning the war.
Here’s the thing… You will not be right every time. I promise. What matters is what you do when you’re wrong.
What’s your plan? Most people don’t have one. And that will crush them eventually.
If you don’t have a plan, I suggest changing your thinking about making money. Set yourself up for sustained success. Start cutting those losers early… and letting those winners ride.
Speaking of your money, I worry you’re making a huge mistake with it today…
What are you waiting for?
If you’re not taking advantage of this bull market yet, that’s my big question for you…
If you are nervous about the stock market, then you’re not alone. Several investors I’ve talked to over the course of the rally were “waiting for a dip to get in at a better price.”
Then, when we got a dip, those same folks would get even more scared of the markets.
Now, we’ve been hitting new highs again. So let me ask you… are you nervous? Are you back to waiting for the next big crash before you put money to work?
This is a huge mistake.
Let me explain…
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You probably know by now that I think a stock market Melt Up is just around the corner – where stocks make one final, dramatic push higher before a furious peak.
But the folks I have talked to are either trying to time it… or planning to sit on the sidelines.
My friend, trying to time when the Melt Up takes off could cause you to miss out on triple-digit gains.
You don’t want to wait until stocks start soaring… and THEN decide to get in.
Melt Ups are big and fast… The tech-heavy Nasdaq alone delivered triple-digit gains in the final 12 months of the last great Melt Up.
Sitting on the sidelines and missing out on even a few big days during that time could’ve been deadly to your returns.
I’m telling you, don’t try to outsmart the Melt Up!
If you’re waiting on the sidelines for a buying opportunity, chances are, you’ll miss the good days. And as you probably know, you REALLY don’t want to miss out on the good days in the markets…
For example, if you had $10,000 in the S&P 500 Index over the past 20 years… but you happened to miss the best 40 days of market gains… you’d only be left with around $7,600.
If you kept your money invested the entire time, however, you’d have close to $30,000.
That’s right… Just 40 days meant the difference between losing $2,400 and making $20,000!
These results come from the investment-management company Index Fund Advisors. And you can see clearly what this means for your money today.
The table below shows what missing the best days of the market would have done to your returns over the 20-year period from the start of 1999 to the end of 2018…
The lesson is simple. Missing out on just a few big moves higher could mean not only missing triple-digit gains, but actually losing money.
And remember, this doesn’t include last year’s outstanding results. The S&P 500 as a whole soared 30% in 2019. You really didn’t want to miss the best days of that rally.
So if you’re still waiting for a chance to buy… or if you’re afraid to buy stocks at all… I don’t want you to miss out on what’s next.
This will likely be the last Melt Up opportunity for many people in their lifetimes. And certain stocks could return triple digits as the market moves higher.
People are always looking for a reason NOT to buy. Trust me… You can always find something.
There will be a time to be cautious. But that time is after the Melt Up.
We’re not there yet. So again, I urge you – “make hay while the sun is shining”…
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Editor’s note: Steve recently aired a special event to reveal a big shift in the Melt Up. More than 29,000 folks tuned in to see just how high he believes U.S. stocks can go before the blow-off top. But if you want to hear Steve’s latest message, you must hurry… We’re pulling the free replay offline tomorrow night at midnight Eastern time. Watch it right here.