…as with everything else in life, shoulda coulda woulda is very prominent when it comes to inventing too. Comments like “I should have sold everything before the month of OCT as I knew it was historically a dreaded month. If I would have done that I could have saved a ton and would have bought back again once the dust settled.” These kind of thoughts are very common among Investors but the truth of the matter is that you would have to get this right twice! Not only would you have to exit at the right time, you would also have be lucky to get in at the right time too. Timing the markets is very difficult if not impossible. When there is blood on the street, you need to have the nerves of steel to take a plunge back in. Also there might be tax implications (unless it is an IRA account) and you might trigger unfavorable short term capital gains. You may also miss out on possible dividends. Timing all this can quickly get complicated, instead there are better ways to protect your portfolio. One of the straight forward method is buying PUTs but just like everything else in life we all want “free” protection! So another option is to write options (Calls) against your assets and collect premiums. This is tricky because you have to write at the “right” strike price for the “right” duration or else it can go against you. Taking OCT month as an example where S&P was down 10%, you would have to write a “Deep In the Money” call. Anything short of that would not be effective. Getting the right strike price is always a challenge and the large wealth management firms have algorithms in place for the same as they manage Billions. We do the same at Kuber Investments consistently all year round for all our Client accounts. By doing it consistently, you actually improve on your cost basis and that is what matters at the end of the day. I would not go into various option strategies but I hope you got the point.
October ended and hopefully the pain too but we are not out of the woods yet. First and foremost, we have to deal with the outcome of the mid-term elections. If GOP retains both the Senate and the House (unlikely), we will see a huge market rally but instead if the Democrats gain both the Senate and the House (very unlikely) then we will see a huge sell-off. The most likely scenario that the Markets are pricing in at this point is GOP keeping the Senate and Democrats reclaiming the house. Markets thrive on gridlocks like this and will take it positively. Once the mid-terms are out of the way, the next speed bump would be the G20 event where all eyes will be on Trump/Xi meeting. We will witness a live episode of “Deal or No Deal” regarding the trade tariffs. So let me ask all those sitting in cash, would you wait out the Mid-terms and G20 or get back in before that as there is a lurking danger of FOMO (Fear Of Missing Out)?
The “Shoulda Coulda Woulda” train will continue its journey but the best thing one can do is forget the past, live in the present and prepare for the future. Good luck!