Default is buy and hold - then you look for opportunities to not buy and hold

When you are investing, you want to hold onto profitable assets that grow year after year (the S&P 500 is an example)

Your default state is buy and hold

So if you look back at Yahoo Finance for the specific stock/index performance for the last 5-10 years, that's what you would get.

Now to get a different return than the market, there are mainly 3 ways:

1) You select securities that beat the market and grow faster than the market. That is usually pretty hard and that's where fundamental analysis comes in

2) You hold cash when the market is going down. For example, you forecast the market will go down by 5% and you hold cash. You buy back after a month. You are now 5% ahead compare to the market

3) You short the market while it is going down. The market goes down and you short - you make 5% while the market is down 5%. Now you are 10% ahead.

That's really what you are trying to achieve when you are investing

It sounds simple because it is.

But what's important is how you define repeatable patterns that can help you identify 1,2,3.

Cheers,

Eric

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Eric Seto

Chartered Professional Accountant (CPA)

Chartered Investment Manager (CIM)

Founder of 5MinInvesting.com

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Disclaimer: This communication is provided for educational and informational purposes only and does not constitute investment advice, a recommendation, or an offer to invest in any fund or strategy. No advisory relationship is formed by receipt of this content. Any references to strategies or markets are general in nature and do not reflect the performance of any client account or investment product.

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