2 minute read
With so many things stealing our time and attention, we must prioritize the few hours we have for anything extra. Some may focus on the pursuit of pleasure, others on the avoidance of pain. I recommend we focus our attention on both. In the next few paragraphs I would like to show why you need to Trade Like a Pro. We will examine how to enjoy your work and avoid the pain experienced earlier this year.
Reason 1: Professionals Are Not Bullish
Most Advisors are bullish and optimistic by nature. Professionals are logical and objective. They focus on a set of rules and lack a buy-side bias. Professionals do not hope for or expect a specific outcome. They have a mindset that allows them to avoid disappointment over what happens in the market. They are not constrained to buy, and hope that the market accommodates their expectations. They follow a simple process that prepares them for uncertain possibilities. You no longer have to stand on the sidelines and watch Goldman Sachs or the large endowments reap continuous profits. You too can begin to think and act like a Professional. Benefits: Greater confidence and less stress.
Reason 2: Volatility is Increasing
In the last decade the average non-peak volatility, as measured by VIX, doubled. This increased the risk of every investment. As the market searched to find value, losses from drawdowns far outweighed the previous gains. Often the losses eliminated months of returns in a matter of days. The rise in volume and speed of computer trading will only increase volatility. By learning how Professionals manage risk, you too can take advantage of the increasing volatility. Benefits: fewer losses and happier clients.
Reason 3: Trading Ranges Create Excess Profits
Computers prefer trading ranges. Because computers process at greater speed and volume, they can trade in both directions. Advisors do not make money in trading ranges, they experience gains, followed by losses, return to gains, and return to losses. The roller coaster ride is frustrating for Advisors and clients alike. Since 2015 the markets have traded almost exclusively in trading ranges, with short, quick shifts in value up and down to a new trading range. Professionals make most of their excess returns in trading ranges. They are paid multiple times to cover the same territory. You too can benefit from trading ranges, by using the tools and techniques of Professionals. Benefits: Increased profits and greater consistency.
Reason 4: Technology Leveled the Playing Field
Advances in technology opened the doors for Advisors to access the same tools used by the Professionals. In the past a gap existed between how Institutions and Professionals managed money and what was available for Advisors. The gap has closed. Never before have so many tools been so readily available. Now you too can trade like a Pro. Benefits: Separate your practice from the herd and outperform your peers.
Reason 5: Assets Rotate
Advisors allocate to fixed asset mixes and Professionals rotate between the strongest asset classes. The reason Endowments have outperformed the market for decades is their Asset Rotation policy. Because no asset class is consistently the best performing, Professionals use specific tools to help them move from strength to strength. The best defense is a strong offense. You too can now trade like an endowment and avoid the risks of a fixed asset allocation. Benefits: Less drawdown in account value and greater control of your process.
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