Look at the market's wild five-year ride:
Source: Capital IQ, a division of Standard & Poor's.
All of those ups and downs have left many investors with nothing but an empty bottle of antacid. And according to a study from Morgan Stanley, following a bad bear market, markets remain volatile for five to seven years.
Ugh. Three to five more years of ups and downs. What's an investor to do?
It's time to take control
Times have changed. This isn't 1982 to 2000, where the rising tide of a long bull market lifted all stocks. I think multibillionaire hedge fund manager Paul Tudor Jones sums it up perfectly: "Adapt, evolve, compete, or die."
No one wants a dead portfolio, so it's time to adapt, evolve, and compete. How? With a stock-picking plan that fits the environment:
1. Find the strongest trends.
2. Determine the best trades.
3. Only bet with the odds.
First, let's take a quick look at each step of the plan. Then, I'll show you how to follow along as I use this strategy to manage my "Trends and Trades" portfolio in today's volatile environment.
The trend is your friend
Trends, both big and small, are everywhere. Here's one that's gaining momentum. The price of natural gas is stuck at the bottom of the well. Many domestic energy companies are shifting their focus to oil, setting up some lucrative opportunities.
EOG Resources
SandRidge Energy
Both companies are switching strategies for the same reason. The economics of drilling for oil are more attractive. That's why I've added both of those companies to My Watchlist.
Trading is not a dirty word
A trade is simply the purchase and sale of a stock. Whether we hold the stock for two months, two years, or two decades, we trade stocks. Many investors prefer to buy and hold stocks. But in today's volatile markets, that may not be enough to grow and protect our portfolios.
lululemon athletica
Contrast Lululemon with Dangdang
Buy and hold is one investing tool. And it's a good one. But not being willing to trade could put our portfolios in danger. Today, trading is not a dirty word.
No gambling allowed
Like you, I invest to make money, keeping score with absolute returns. Beating the market is no consolation if my portfolio is in the red. And investing when the odds and payoffs are in our favor is the best way to keep them in the black.
Bank of America
Bank of America is too complicated for me to reasonably assess the odds. I understand Apple's
The perfect plan
The stock market has recovered nicely from its low in March 2009. Unfortunately, the U.S. economy is slowing down again. There's no political will for additional stimulus and fear is creeping back into financial markets. Odds are good that volatility is here to stay. That's why I plan to:
1. Find the strongest trends.
2. Determine the best trades.
3. Only bet with the odds.
I'm going to use this approach to grow and protect the capital in my "Trends and Trades" portfolio. I expect it to pay off handsomely, so you won't want to miss any of the action. To stay up to date with all the research and trades, simply click here to follow along on Twitter at @trendsandtrades. It's simple to use and best of all, absolutely free!