9 Minute Read

Tackle Today: Sometimes you have to lose money in the short run…

August 20, 2021

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The price of profits


Coach Tyler here. As I was analyzing my various positions during this week’s drama, the following phrase came to mind:

“Sometimes you have to lose money in the short run to make money in the long run.”

Consider two applications of this concept.

First, tactical traders get stopped out of positions and take a loss when stocks break support. In the process, they lose money. But taking small losses now instead of giving into loss aversion sidesteps larger losses later. When winners inevitably return, their equity curve will tilt back in the right direction, and long-term profits will ensue.

Second, the only way to guarantee you participate in the long-term growth potential of stocks is to sit through the inevitable downturns along the way. The equity risk premium (which refers to how stocks generate higher returns over time than the alternatives) is not free. Experiencing the gutwrenching volatility of the stock market is the required price for capturing their superior returns.

To wit: only those who held through last March’s pandemic-induced plunge without panicking were able to bask in the nearly 50 new record highs we’ve seen this year in the S&P 500.

Remember this as your long-term holdings get battered about this month.


Chart of the Day

Crude Conditions

Energy lies at the epicenter of all that ails the market these days. Crude oil cracked critical support at $65, bringing energy stocks down alongside it. Here’s to hoping the rising 200-day moving average and psychologically significant support at $60 can swoop in to save us if the selling pressure persists.  

Video of the day

Buy One, Hold One, Dump One

Coach Greg analyzes 3 stocks from the Utilities Sector – Dominion, Consolidated Edison, and Public Service Enterprise Group – and asks the coaches which one they would Buy, Hold, and Dump, in this segment from Thursday’s Halftime Report

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