It’s amazing what something as simple as a grease pencil can do.
It can save your life… and maybe even make you a ton of money.
If you know us, you know we’ve spent many days on the open ocean.
Over the years, we’ve owned big boats, little boats and everything in between. From crashing 60-foot steel hauls through the frigid waters of Alaska to dodging lightning bolts while chasing tuna on the East Coast, we’ve given our maker plenty of chances to take back what he gave us.
Through it all, there was always something odd scribbled on our windshield.
It was a simple number. Each time we’d clear the rough seas of the inlet, going from calm inland waters to the rolling waves of the ocean, we’d get out our grease pencil and scribble a number on the windshield in front of us.
It was our backup plan.
It’s true that modern boats have fantastic equipment. With just a few pushes of a button, we could plot our course, scan the radar to see whether anything was in the way and tell the boat to drive us there.
It was great… when it worked.
But many folks have died when things have gone south. Without the aid of electronics, they were lost and blind at sea.
That’s why we wrote those numbers on the windshield.
As soon as we had our distance and were heading to our destination – say 32 miles and 94 degrees – we’d add or subtract 180 from it and get our return course. In this case, we’d write 274.
If all else failed… say if one of those lightning bolts finally caught us and fried our electronics, we’d turn to our fail-safe compass, put the pin on 274 and sail smoothly under the bridge back home.
That simple trick meant there was no need to worry when we lost sight of land. There was no need to fret when the left looked exactly the same as the right.
They say safety should come first. But if that were the case, we’d never do anything worth doing. Even driving to the grocery store is an inherently unsafe act.
We say safety is important… but it must not be the priority. It must come second.
We didn’t stay on shore because of the dangers on the sea. We prepared. And we made the adventure.
We’d never get anywhere if we didn’t.
Now… perhaps you’re wondering if ol’ Andy hit his head again and thinks he’s now writing an offshore fishing newsletter (that’d be fun, right?).
Perhaps you’re wondering what any of this has to do with any of that other stuff we’ve written.
If so… hold on.
We’re still on course.
You see, our mailbag has filled up in recent days with readers asking the same question. It’s a question we get every time the market strikes new highs.
Is it too late to buy stocks?
At times like these, we get notes like this one from a reader who ponders whether he’s fearful or greedy with the market at bubble-like valuations…
I would have to put myself a bit in both categories, however, I think they both lean toward greedy.
My fear comes from paper losses and lost opportunities. I know the markets are going to correct, but I don’t want to exit the market too early. But neither do I want to watch the crash coming and fear I will miss the opportunity. I typically will begin to pare positions when I feel a market crash is coming so that I will have cash available to buy when the correction happens.
I feel greedy just because when that correction happens, I will have a set of equities which I have wanted to own (or own more of), but felt they were too expensive. I can buy them at bargain prices when a correction happens. – Reader R.W.
It’s a sentiment every investor has dealt with… especially during the bull market of the last 12 years.
Your Backup Plan
Since the lows in March 2009, wary investors have griped that valuations are far outpacing growth. They’ve sat on the sidelines because of it. Or, going back to our idea above, they’ve stayed tied up to the dock, worrying about what might go wrong.
They put safety first… and getting ahead second.
It cost them dearly.
Instead, they should have gotten out their “grease pencil” and used a simple trick to ensure a safe voyage no matter how rough the seas.
To be clear, this safety technique is why investing in stocks is one of the best and smartest ways to make money.
Lots of dreams come true when a business plan goes right. But there’s no easy way to get out with just a small loss when things start to fail.
Lots of money can be made in the real estate game. But again… commissions and taxes alone make a cheap, quick out nearly impossible.
That’s why stocks shine. Nothing is as liquid and transparent as the modern stock market.
Nothing comes with such a robust and surefire escape plan.
Preparing for the Surge
We’re on the record saying the Dow will hit 100K sooner than later. It won’t happen in 2021… but it will happen much faster than the climb from Dow 8K (2009) to Dow 30K (last week).
Along the way, growing legions of folks will say it’s overdone – that the market must correct in a big way.
They said it all the way to Dow 30K. Those same folks missed the big, life-changing gains.
We are convinced they will now miss out on the greatest market explosion of our lives.
But what if, dear naysayer, you are right and we are wrong? What if stocks really do plunge?
Again, this is where stocks shine. Unlike a directly owned business or a real estate investment, you can ditch them in a heartbeat.
Get out your grease pencil, set your limit price – it can be a dollar price or, in the case of a trailing stop, a percentage below the high – and cash in your chips only when it’s hit.
Ride the upside… and jump off on any downside.
It’s easy to do. You can do it right now.
Simply log in to your brokerage account and set a trailing stop on all of your positions. Pick your number. You can sell whether the stock drops 10% below its high… 15% below its high… or to whatever figure you’re comfortable with.
No matter what you choose, this simple trick lets you go out to sea and ensures you’ll always find your way back home.
There’s no way to predict the exact moment stocks will plunge. It’s financially devastating to sit on the sidelines and wait to, as the reader above says, “buy at bargain prices.”
Trying to call a top is like predicting when the wind will stop. There’s always another gust to make you look like a fool.
The free-money machine is pumping stock prices to record highs. It will continue. It has to.
Take advantage of it.
And if you’re worried about a downturn, don’t. Set your stops and worry instead about how you’re going to spend all that money Washington is putting in your pocket.
We recommend a new boat.
P.S. December 18 is going to be a very big day for some of our subscribers. That’s when a bizarre market event triggers a trend that could have handed you up to $124,288 over the last 12 months. There’s still time to get in on the action, but you should move quickly. Click here for all the details.
Are you putting safety first and sitting on the sidelines? Tell us about it at firstname.lastname@example.org.