For Investors in FB, TSLA, and AAPL, Proactive is Better than Buy and Hold

Before reading this article please understand that my past experience navigating the Internet Bubble, Credit Bubble, and the Bubble we are seeing today has taught me some very important things, and I am making very important statements here.  These should be taken to heart.

This article is directed at responsible investors, not the guy that puts 90% of what he has in 1 stock, and I don't care if it is Facebook Inc (NASDAQ:FB), Tesla Motors Inc (NASDAQ:TSLA) or Apple Inc. (NASDAQ:AAPL).  I am not talking to the person who almost went bankrupt (or maybe did) because he got caught up in the housing bubble years ago and is finally back on his feet, and I am not talking to that person who only has a few thousand dollars in the market and is young, planning to invest more and more every month.

I am not talking to any of the above, but instead I am speaking directly to those investors who are fully invested, those who have remained fully invested, and those who reasonably are considering staying fully invested no matter what happens to the economy or stock market.

I began my company, Stock Traders Daily, at the peak of the Internet Bubble, but instead of getting decimated when that Bubble burst we flourished.  There is a reason for that.  In addition, I began a Strategy in December 2007, right before the Credit Crisis wiped out the wealth of the vast majority of investors, but that strategy is now the best performing strategy on the market that I know of, beating the S&P by a whopping 230% since that time.  There is a reason for that too.

I am not telling you that you should follow what I do, but I am telling you that you should listen to what I say.  In every instance, including the good times of course, we have maintained a philosophy that "short term gains lead to long term success."  This is something that people shun when the markets look great and embrace when the markets look bad, but we never sop embracing the notion, and sometimes that makes people think we are a little off topic when everyone gets bullish.

Instead, arguably, I might be the biggest Bear you will ever see, I believe a Market Crash is on the horizon finally, but I also know that every time the market has hit a pivot point in the past few years it has broken through and accelerated.  This is fine with me because the strategies we use react to things like that, and although they are designed to continue to react like they always have, this time something is different out there.

In today's economy we have a Central Bank that is no longer as accommodative as it was.  Last year the analysts said that the market would not fall because the FOMC was spewing money into the market every month, and they were right, but that has stopped (officially next time the FOMC meets). 

For you who are fully invested at this pivot point, a level at which the FOMC has also officially finished printing money to inject into the economy, you must prudently ask yourself what might happen if the music does stop this time, and instead of breaking through like it has in the past what if the market reverses down like it did after the other Bubbles we have been witness to.

My argument to clients is that we are absolutely in a bubble, and when we compare where we are today to where our macroeconomic analysis (The Investment Rate) says we would be when stimulus officially ends, the difference is directly in line with the meltdowns that happened after the prior bubbles.

So, as a 'fully invested' investor, do you think it is wise to integrate risk controlled strategies near this potential pivot point, or do you think that you would prefer to just ride it out.  Please note, people who are fully invested (with large dollar amounts) near market tops cannot just 'add more' to average in when the going gets tough like people with very small portfolios can. 

I think it is very wise to adopt risk - controlled strategies.  My recommendation is to do so immediately.  The best scenario is that the market falls hard and you prevent another round of wealth destruction from hurting you, and then you pick up the pieces when everyone is panicking, and the worst case is that you need to do a little more work if the market continues to increase because, reasonably, risk controlled strategies that work in both up and down markets do require a little more work than buy and hold.  I think the trade off is worth it for people with sizeable portfolios.