Why long short strategy beats buy and hold?
Most people are taught to be buy and hold investors as you cannot time market. Yes - this is true.
In other words
If you cannot time the market, just buy and hold.
However
It is possible to time the market and this is how you can achieve a higher than average return.
The math is simple.
Imagine S&P 500 makes 10% per year.
You find a pattern (e.g. negative momentum, interest rate increase, bad earnings etc)
Option 1: You hold cash and the market went down 5% in one week and you buy it back
This means you are higher than the market by 5% = 15% per year.
This also means that you just need to hold cash one week out of the year to achieve such a gain
Option 2: You exit and you short the market when it went down 5% and buy it back after 1 week
This means you are higher than the market by 10% (you made 5% on the way down and 5% on the way up) = 20% per year
You just need to be right about one week out of the year going down to beat the market by 10%
This is what I spend a lot of time studying - patterns that would forecast the near term to be bearish.
This is why it is easy for a long / short strategy to perform better than buy and hold.
Cheers,
Eric
Eric Seto
Chartered Professional Accountant (CPA)
Chartered Investment Manager (CIM)
Founder of 5MinInvesting.com
In December, my goal is to help 20 people without a financial background to master investing through Investing Accelerator.
Investing Accelerator is designed for people without a financial background.
The goal is to achieve 30% return per year.
In the first phase, you will learn long term investing and targeting 30% for tax free compound growth. This will help accelerate your overall wealth.
In the second phase, you will learn monthly passive income to provide a more predictable cash flow (target 30% per year) which can cover your expenses. This will help accelerate your retirement goals.
Here's a step by step guide on how to join Investing Accelerator for free: https://www.skool.com/invest-retire-community-1699/how-to-join-investing-accelerator-for-free
If you are interested, then let's hop on a call to see if you can benefit from the strategies in Investing Accelerator and get target 30% per year.
During the call, we will map out exactly how you can achieve target 30%, what you are lacking, how you can improve.
If you have any questions about the program, you can ask during the call as well.
Schedule a call here: https://bit.ly/48mJlgR
Remember to go to the Classroom tab for additional investing resources.
10
17 comments
Why long short strategy beats buy and hold?
skool.com/invest-retire-community-1699
Investment & Retirement Strategies for busy full-time professionals. Long-term investing & Monthly Passive income ideas.
Leaderboard (30-day)
1
+278
2
+226
3
+222
4
+188
5
+150
Powered by