Buying at Resistance Levels

If this question could be answered, people like me wouldn't look on technical analysis as gambling.

Sorry for the zinger. It wasn't intended to cut but, rather, to amuse.

Whatever your approach, there are legions of people who think your process is insanity. We have all found our own way and I'm a bit of an outlier so I encourage you to disregard this post. A few people are starting to seem of similar mind to how I have thought for the last 20 years so it looks like it is near time for me to change my entire philosophy.

I have been a long term investor but soon it will be Tom, in the library, with the candlestick.

 

Once again, i suggest avoiding the mistake pf thinking we all have some inside knowledge which you are not privy to.

We are all on our own journey. We all have our own success rate. Beware of the people who post with absolute confidence and declare themselves experts. These people are the least likely to have unique knowledge.

Also, keep in mind the winner of the 2019 trading competition, here on Stockaholics, produced a return of 15.1% while people who purchased VOO and held it for the same period earned 29%.

The trader is pleased with his returns and sees it as achieving a certain level that he can build on. He may be right. I may be crazy. It just may be a lunatic you're looking for.

 

I only own individual companies, however, I am aware it is excruciatingly difficult to outperform the S&P 500 index.

The investment group that has consistently done the best is the group who buys the S&P 500 index with the lowest management expense ratio (That's VOO), doesn't time the market, just buys when they have money, and holds it for a couple of decades. 100% of this group have done very well over the last 100 years.

I'm taking some license when I cite the S&P 500 over the last 100 years because, until the 1970s, the primary index was the DJIA. However, the idea stands.

I have some concerns with ETFs. They are not all created the same. They bring their own danger but VOO has proven itself a champion since John C. Bogle created it in the very late 90s. Before VOO, Vanguard had an S&P 500 mutual fund that was started in the 1970s which was essentially the same thing.

This makes no sense but almost no one has outperformed the broad index of the S&P 500. You would expect half of investors to outperform and half to under perform but it's actually something closer to 99.9 under perform and 0.1 outperform.

Exchanges keep track of short term trades and 94% of short term trades lose money. It is extremely difficult to outperform the market with commissions and/or front runners taking their cut. Nobody trades without a thumb on the scale, yet legions of people line up to inject their money in a game everyone knows is fixed.

Consider, if you are in the 6% of short term trades that are profitable, what are the odds of your next trade also being profitable. The more you trade, the more you lose.

The people who blindly buy VOO and add to it regularly over a long period of time have all succeeded brilliantly. Will it continue to produce as such? I dunno. Nobody does. Will AI turn the financial world upside down and turn our society into a Mad Max situation? Dunno that, either. Will currency continue to have value? If I knew all of this, I wouldn't be here trying to figure out how to not starve in retirement.

 

Further,

I have outperformed the S&P 500. Yes, I claim to have pulled the sword from the stone. Many claim this. Almost no one has actually done it. Take this claim with a grain of salt.

Meanwhile, I can see my recent returns are under-performing the S&P index. Over time, I will return to VOO levels and then drop below them. My portfolio is designed to under perform the S&P. Everything I own is boring. My expectation is 10~12% return and I am pleased with that.

I've had a wild ride of REIT buy-outs and an epic win with Tesla. I first purchased Tesla in 2016, back when just mentioning the holding of Tesla would draw endless criticism and even threats of violence (which I have received in a private message on another board). The threat literally came from mentioning I purchased 400 shares in August of 2016. My Tesla story is far more nuanced than that but you would have to read countless pages of the Tesla thread because I'm not going to type it in again.


Here's something. I notice a couple of the locals somewhat freaked out last year when I mentioned I thought there was far better than even odds of a 4x return on HTZ in the summer of 2020. The thread is in the stock forum and contains my high level analysis. We still don't know how that is going to work out but it appears people who purchased at $1.80 last year will get their money back, plus HTZGQ, plus warrants. It might come somewhere close to 4x return for those who had the courage.

This isn't a joke... if you mention doing something and people flip the hell out, you could be onto something. These sort of reactions are one of the benefits of being on a forum like this.

Also, keep in mind the market is fuelled by people trying to get rich quickly, like yourself. You folks are the ATMs of the investing world and we appreciate your willing participation.

There is a way to avoid 100% of the market pitfalls: front runners, counter intelligence news, commission overhead. It's called, "long term investing". The influence of the parasitic forces goes down over time.

I'm an old guy. Long term, I will hold nothing but indices. I used to hold 11 companies. Now I hold 6. In the next two years, that will turn into 3 plus an index. I do almost no trading, other than occasionally adding cash to our portfolio and expanding various positions.

 

If you can outperform VOO, do it.

I used to suggest that new traders split their money in half. Put half into VOO and trade with the other half. When you add money, always put half into VOO. Many people put all of the new money into trading, wanting to "balance" it or compensate for a trade that "almost connected" for a big gain. Don't do that. Split evenly.

If you split your money in half for the first two or three years, it will be pretty clear which is the winning strategy. From there, go with the strategy that worked best.

 

Tom,

Reading through your thoughts was very helpful. I appreciate you taking the time to put pen to paper and help us newbies out. Specifically I like the idea of putting some money into VOO and trading with the rest. If I had done that 15 years ago when I put my first $100 dollars in I would have probably not become overwhelmed and quit trying.

Regards,
Crash