MOST INVESTORS ARE NOT FACING REALITY

  Most investors have a similar view of the investing scene.
They hold the following beliefs:
♦ Buying a diversified basket of stocks and holding them for
the long run is the best way to invest.
♦ They can perform better than other investors, because they
are smarter than they are.
♦ Buy and hold is the only rational way to invest.
♦ Market timing is for losers.
♦ Dollar-cost averaging is a good strategy.
♦ Financial advisors, brokers, and so-called stock market
gurus should be consulted or followed to obtain the best
possible investment results.
♦ Tax consequences should always be considered in making
investment decisions.
Believe it or not, all these beliefs are false! Many intelligent individuals
are not intelligent investors. In making their investment
decisions, too many investors rely only on fundamental research and
totally ignore the technical indicators of stock market investing.
Investors must understand that their thinking may not be realistic or
accurate and that they cannot be successful as investors by viewing
the world through “rose-colored glasses.”
Neither should you let tax consequences interfere with sensible
stock market strategies. Otherwise you will end up paralyzed
and confused, and you will never sell you losers or winners. Of
course you can use market-timing strategies without concern in
tax deferred retirement accounts because there are no tax consequences
in such accounts. But, don’t assume that taking profits in
regular accounts, will work against you. It may or may not. But the
primary concern is on protecting and preserving your capital and
tax considerations are only secondary to your financial well being
where the stock market is concerned. You may be intrigued by
some of the statements and findings presented in this book. One of
the major premises is that buy and hold is a loser’s strategy—that’s
right, a loser’s strategy. You won’t see that statement very often in
your perusal of the financial news. An entire chapter is devoted to debunking the buy-and-hold crowd. Another critical premise is
that the safest way to invest in the stock market is to be “out” of the
market in a cash account (or to be short the market), during declining
periods, and to be “in” the market only during the most favorable
time periods. This completely contradicts what some experts
will tell you. You will hear “It’s time in the market that counts, not
timing the market.” I will show you that the opposite is true.