The first steps in my stock market journey are the both the best and worst experiences in my investment "career". It was the worst because I lost nearly 20% of my capital (which is forgivable for a beginner, at least in my belief), and it was the best at the same time because I earned back with a whopping 133% gain in just one year.
For those of you who don't know, a sloth is an animal used by Bo Sanchez to describe investors who use the buy& hold strategy. Truly rich club members call themselves the turtle, and "they always win". In this post, I'll show you that a turtle can be beaten.
Other race joiners are (taken from Bo's book, "The Turtle Always Wins"):
- Squirrel - the novice trader.
- Rabbit - the trained trader.
- We all invest equal total amounts of cash (approx 70K).
- Starting point is the month of March 2009.
- The finish line is at the May 11, 2010 mark.
- For simplicity, we'll just have ALI as an example, and board lots are not followed.
Remember that Bo Sanchez's turtle divides his capital into 12 (14 for this case) then invest them every month slowly. So the turtle have approximately 5K/month.
Let's assume that turtles were able to buy at the lowest prices posted every month.
A sloth like me is "lazy", so I invested my 70K ALL IN.
This is how the turtle did in the race:
And this is how I did:
I bought ALI at 5.8/sh last March 25, 2009.
Then sold it at 13.5/sh last May 11, 2010.
That's 133% gain in 14months!
Even if we followed the boardlot, I would still win!
This is not an accident, by the way!
What have you noticed with my buy date? You could easily answer it had you been listening to the news back then. 2008 is the year of recession and the stock market crash (the bear market)! And in 2009, the market is starting to recover (going up trend) already.
This is one, if not the only time that you'll be able to "beat" the turtles. It was a big risk, but a risk that's well managed.
Like I've said, it's not an accident. I was well informed in this phase of the bear cycle by my broker. Here are some samples of their report during the most recent bear market:
That's why it's very important for you to get the services of the best broker available. Had I not been informed, I will not risk all my capital. Information is key!
You will only get another shot at this in the next bear market bottom, where the market has no other choice but to go up!
Don't get me wrong, turtles have a fool-proof SAM strategy. In fact, I use this strategy more often than the buy-hold. But I believe rabbits, though risky, can earn more than everyone else. Rabbits are exception to the rules - and most of us are the rules, not the exceptions.
The reason why most of us are "eaten by the bear" in the stock market, is that most of us think we're rabbits, but we're actually squirrels. And some are already too late to be a sloth. Consequently, we become the turtle. Better safe than sorry, right?
I'd like to learn from you.
Do you have a strategy that gives you more earnings than the normal peso-cost average (or strategic cost average)?
If you're sticking with peso-cost-average (PCA), I'd like you to share why.
If you're a technical analysis trader, how did it go compared to PCA?