When Investing Trends Won't Die
Story in the WSJ this morning about how investors could get burned betting on things getting back to normal. The trades mentioned were the VIX, an increase in interest rates, and natural gas, but the list could go on and on. Trying to invest against the trend can make you a tremendous amount of money if you hit it right but that happens infrequently and is usually a result of luck, not skill. It is tempting to try to get into something on the low and we have all heard that the way to make money is to buy low and sell high. However, this is much easier said than done. Any gains you can make from lucky trades are often swamped by the losses from the times when the trend persisted. So unless you have a crystal ball a better approach, one that does not rely on luck, is to stay in harmony with market trends----buy high and sell higher.