Why Stock Investing Is a Lot Like Skiing
A few weekends ago, I took my family to Massanutten Ski Resort in the beautiful Virginia mountains. (It's not Telluride, but when you have an eight-year-old son who yells "Woo-Hoo!" all the way down the slopes, it really doesn't matter.)
We had admittedly low expectations for skiing when we arrived. It's been an unusually warm winter and the snowfall has been virtually nil. Yet the night before we skied, the snow dumped fast and furious on top of the base of artificial snow.
The next day we woke up to a winter wonderland. Everything was covered with snow. The sun was shining. And it ended up being a perfect day. I couldn't help thinking this was a lot like the stock market.
Here's what I mean…
As well as being the Chief Investment Strategist of Investment U, I'm also the Investment Director for The Oxford Club – a private fellowship for investors trying to achieve and maintain financial independence.
And our Club has won numerous industry awards for editorial excellence. (The independent Hulbert Financial Digest ranks us among the top-performing investment letters in the nation for 10-year performance.) Yet much of our success actually comes from being well-positioned to take advantage of completely unexpected circumstances.
Right now, for instance, the 25 recommendations in our Oxford Trading Portfolio are up an average of 52.78%.
Our portfolio is beating the market by a wide margin for two primary reasons:
- The first is that we have a proven system for identifying great companies at attractive prices.
- The second is that we don't try to time the market. So when it suddenly puts on an impressive rally, as it has over the last few months, we are set to enjoy the benefits.
I don't have a crystal ball. And neither does anyone else. Three months ago, we couldn't have told you that the market was about to power higher. And two weeks ago, when I made my reservations for a mountain villa at Massanutten, I couldn't have known that the skies would suddenly open up. But in both cases, it did.
Of course, stocks might not have rallied and the snow might not have fallen. But at least we took a chance. Successful investing is about hedging your bets, taking intelligent risks and being prepared for whatever happens.
Folks who wait for that mythical day when the investment landscape looks perfect will regret it. Just as those who wait for ideal conditions before planning a ski trip will find the fares are higher, the lift lines are longer or, if they wait too long, the snow is already gone.
Market bears will counter that the conditions may look right today, but that can change quickly. I don't disagree. But we've thought about that, too.
We own plenty of investments outside the stock market, so our performance isn't based on equities alone. We abide by strict position-sizing rules to limit our risk. And we run a trailing stop behind all of our stocks, assuring ourselves that our profits don't slip through our fingers.
It's not a perfect system but it works, delivering high returns during the good times and protecting capital during the bad ones.
It sure beats sitting at home… wondering if it will snow.
P.S. The backbone of our success at The Oxford Club is some of the best research in the business. Our latest find is an energy company we think could easily triple from today's price. For the full story, click here.