Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Did GameStop Mark the Stock Market Top?

Stock-Markets / Stock Market 2021 Feb 05, 2021 - 06:53 PM GMT

By: Stephen_McBride

Stock-Markets

 “You do stocks, huh? I’m thinking about ploughing a few grand into GameStop. That thing’s going to the moon, bro!”

The guy on the treadmill next to me was clearly excited. Then he told me all about another opportunity as he wiped sweat off his face.

The next Tesla,” he said, grinning from ear to ear. And he wasn’t the only one. I had at least four conversations about stocks at my local gym last week. (It’s not exactly a hotbed of investors. In fact, I’ve never talked about stocks there until recently).

Another guy told me he bought $5,000 worth of Royal Caribbean Cruises. Why? It “went down a lot.” And he thinks it’s a “lock” to bounce back.


And unfortunately, it’s not just at the gym. An acquaintance told me he’s “dropping a bunch of money” into an electric car startup that hasn’t made a single car. Another guy told me he’s thinking about getting a quick loan to buy Bitcoin.

One thing’s for sure: making money in stocks feels really easy right now. Stocks are on a crazy run. I’m sure you’ve seen some of last year’s most hated stocks, like GameStop (GME) and AMC Entertainment (AMC), exploding higher. GameStop is up 2,140% this year. AMC soared 300% on Wednesday!

Now, I’m not calling for the top. But this is a clear warning sign, and a reason to start playing some defense today. It doesn’t mean to start loading up on risky stocks like my friends at the gym. What I’m doing with my own money, and what I’m recommending my readers do is simple:

I’m Investing Like I Might Be Wrong

My research suggests stocks are headed a lot higher. And certain sectors could hand out a lifetime’s worth of gains in the next few years. I personally have a lot of money invested in disruptor stocks. And I’m still buying today.

But no matter how bullish I am, I still invest like I might be wrong. What do I mean by that, exactly? First, don’t lose sight of why we invest in the first place. We invest so we can live comfortably, own lovely homes, enjoy wonderful vacations, and eventually live fulfilling retirements.

We invest to build lasting wealth. To make the new wealth you’ve likely generated in the past few month last, you must avoid significant losses. In my experience, this is the #1 thing that separates investors who grow rich from those who never reach their financial goals.

There are a lot of “one hit wonder” investors who strike it big during a stock market rally, only to give it all back on the other side.  Because they didn’t invest like they might be wrong. Don’t be that person.

Respect the market and always remember—stocks fluctuate.  As I said—I’m convinced stocks are headed a lot higher. But there will be 10%, 20%, 30% bumps along the way.  So today, I’m sharing two proven strategies to help you come out on top no matter what happens next.

Strategy #1: Consider Taking “Free Rides”

A “free ride” is a simple strategy we often use to lock in profits when one of our recommendations shoots up 100%+. The idea is you sell enough shares to take your initial investment off the table, and then let the rest “ride” risk-free. It’s the best way to eliminate any risk while still going after big gains.

Our microcap specialist, Chris Wood, locked in an incredible eight free rides in January alone. And I recently told my Disruption Investor subscribers to take free rides on PayPal and Albemarle after they shot up over 100%.

But not everyone was happy with me. One subscriber even said we were “leaving significant money on the table.” And it’s true: This time, you could argue that not taking a free ride on PayPal was the right move. We’d currently be up a little more if we didn’t take the free ride.

But if I had to do it all over again, I’d still take a free ride—no questions asked. A free ride gives up a little upside in order to guarantee 100% that a trade will be a winner. I’ll make this tradeoff every time.

In short, you can never go wrong taking out your initial investment when you’re up 100%+. Keep in mind, you don’t have to be up more than 100% to apply this strategy. If you’re up 50% on a stock, you can sell two-thirds of your position to recoup your initial investment. Then let the rest ride with zero risk.

My subscribers can sleep well at night knowing that whatever happened with PayPal, they had locked in a substantial profit, and this trade could never go against them. You simply can’t beat that.

Strategy #2: Smart Position Sizing

Investors get excited when they read about a game-changing stock with huge upside. Their minds instantly race toward the big profits they could make. But often, they forget to stop and ask: What’s the right amount of money to invest in this stock?  I’ve talked to folks who’ve had so much of their wealth tied up in one stock they can’t sleep at night.

You never want to be this person. You never want to bet half your account on one position. Think about how you would feel to watch it sink, say, 40%. It would be crushing to lose a big chunk of your wealth because of one dumb decision.

Remember, it’s impossible to know what will happen on any given day in the markets. So it’s important to keep your position sizes small so that it won’t hurt too much if one doesn’t go your way.

In short, To Consistently WIN You Must Always Invest Like You’re WRONG.

Right now, making money is the easy part. People are getting rich of GameStop and AMC and think nothing can go wrong. But dodging losses is what separates successful investors from amateurs.

Nobody ever went broke taking profits. So if you’re sitting on huge gains in your portfolio, consider taking some money off of the table today.  And if you currently have too much money in one stock, make sure to spread your risk around by allocating that capital into your other positions.

Don’t be like the guy at the gym. Being smart in times like these will let you come out on top no matter where the market’s headed next.  As I said, I think the trend in stocks is UP. But I’m ready for a pullback, and you should be too.

The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money"
Get my latest report where I reveal my three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here.

By Stephen McBride

http://www.riskhedge.com

© 2021 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules