Apparently, most people must want ordinary returns…
They follow ordinary investment advice… and do what the ordinary investor is doing.
Where’s the fun in that? I can guarantee you’ll never make a fortune this way. By doing what the ordinary investor is doing, you’re set up for ordinary returns, at best.
[ad#Google Adsense 336×280-IA]The thing is, you can do better. You can be extraordinary.
Right now, the ordinary advice is to be scared. According to the polls I follow that track investor sentiment, everyone is scared right now.
The ordinary opinion is to not be bullish. But history shows that when this happens, you want to BUY stocks. Let me explain…
Individual investors, newsletter writers, and investment managers are all NOT BULLISH right now. Let’s take a look at each and how you would have done buying stocks when everyone else was scared…
According to the latest weekly poll by the American Association of Individual Investors, right now, individual investors are less bullish than they’ve been in all of 2011. Individual investors were this scared twice in 2009 and twice in 2010. Each time, the market “popped” up right after.
Also, according to my friend Jason Goepfert of www.SentimenTrader.com, “Newsletter writers looking for a short-term correction have jumped to a nearly 25-year high.” Jason looked back to the five other instances similar to this one. He found their correction fears were unfounded. “There was never really any correction at all.”
Finally, Jason just reported that “confidence among investment managers” has dropped near a five-year low. He showed how stocks have typically done well over the following three months when that’s happened.
So individual investors are not bullish. Newsletter writers are expecting a correction. And investment managers don’t have confidence. Everyone is scared.
But history shows when everyone is scared, you make money.
You can be ordinary and go with the crowd. Or you can be extraordinary and go against the crowd. History shows the right way to be is extraordinary.
Trades from sentiment extremes like this are typically good for about three months. After that, the benefit from the sentiment extreme has worn off.
Nobody is bullish about stocks. So it’s time to buy. And history says your safest bet is a three-month trade.
Good investing,
— Steve Sjuggerud
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Source: Daily Wealth