Wednesday, March 11, 2009

Beating the Market vs. Making Money

Medium-term bottoms in bear markets are steep and brief, and it's basically guaranteed that I won't be cashing out of GRZZX on the right day or at the best price, so I'm happy to make any positive returns at all in this market. The thing to remember about bear markets is that cash outperforms stocks, and anyone who's been 100% in cash or money market funds has been doing better than just about every other stock-holding portfolio.

Making MoneyBeating the S&P
Bull MarketEasy: Index fund (SPY)Hard: Timing or stock picking
Bear MarketHard: Shorting+timingEasy: CASH!

Update: The sale of the 2nd GRZZX position today happened at a price of $10.00 on the nose, for a gain of 10.7%. Half of my original $9.03 purchase of GRZZX has now been cashed out, for an average gain of 9.1%.


Anonymous said...

Actually, anybody with he ability to trade and buy ETF's in their IRA or 401 has had an excellent chance at beating the market. Any of the inverse funds from Direxion or Proshares are simple tools to capitalize on the market. Mutual fund investors will have a much harder time at "timing" the market as they won't get "real time" pricing and pay higher fees. Essentially guessing at the closing price or worse, next day pricing.
On this rally you could look at FAZ or SDS as better chances to profit than GRZZX. FAZ often moves 10% in a day which puts you ahead of most buy and hold participants.

Mega bear market- really realy easy.
Buy inverse funds on rallies
Sell inverse funds after 10-20% repeat.

Jody said...

Sure, it's easy in theory to say "buy a bear ETF at the top and sell at the bottom," but it's difficult to do in practice, partly for psychological reasons, but mostly because of the sharp and unpredictable nature of bear market bottoms.

FAZ lost 29% yesterday, by the way. Good luck with that!

vv said...

Any plans/thoughts on buying SPY or SSO to hedge on the bear rally that we have going on? The last rally we had went from 740 to 900. GRRZX went from $12 to $8 back then.

Jody said...

No. I'm actually getting ready to put the cash back into GRZZX! News on that when it happens...