I think it is important I should clarify. While I am only a trader out of necessity (usually for protection as distinct from a day or weekly trader ) , I am not in the Buy and Hold camp either , in fact I have always cautioned Buy and Hold market participants since awhile back, I believe in short term and opportunistic investing.
As I explained here before , there are times when it is better to be sidelined i.e reduced equity exposure and there are times to be more overweighted. I look at macro and micro aspects - the macro favourable for short term investing would be when we have economic clarity and stability and macro geopolitical and others (health) environment is good , an example was the period from start of 2019 to until the yield curve inverted in middle of last year, the micro relates to corporate fundamentals, price action and valuation , when we get both positives, it was time to be overweighted equities. When we have both negatives like now, it would be time to be underweighted. When we have one positive usually micro (because as long as Mr Trump is in charge, it is hard to have a stable macro environment) , it is possible to benefit from a short burst of exuberance like from since April.
Short term investing involves buying into the market when we get either one positive and preferably both , otherwise when we start getting two negatives and we need to pre-empt to be Ahead of the Curve, it would be best to stay on the sidelines. Getting into the right stocks during the window of opportunity usually smaller caps potential with minimum capital can get one the short term return to skew up overall returns from remaining idle cash. In some cases, the small or microcap opportunity could be a long term gem and would obviously require appropriate due diligence assessment on its vulnerability and susceptibility to a continued protracted economic winter environment.
Following the market downturn when the trade war broke out, it was a period of two negatives and I stayed out and of course I missed out the late Australian market rally in Dec-Jan but it was a blessing in disguise as I avoided the crash. In January, I called out a possible correction as I had indicated then that the markets were not factoring in the threat of COVID and exuberance was over the top. The Big Kahuna finally arrived after calling it two years early - so convinced I was that the bear market would be brutal that I started getting into the Bear ETFs (the ultra strong ones) and ironically that caused me some pain as the markets defied all expectations and did everything no one expected.
In line with Vern Gowdie's mantra of Winning is Not Losing, it is more important to avoid losses and think of protection than to chase for profits. IMO remaining in the market indefinitely is a recipe for losses because the economic winter would be more protracted than the market expects it and market valuation is now incredibly stretched. The only piece holding the market together is Exuberance , and unwarranted confidence based nothing more than the belief in the Fed put. The Fed put is no guarantee the market wont correct by 10-20% from here even though it may be work to provide a floor at the extent at which equity prices could collapse. Exuberance in markets as we know is not permanent - Assumptions are Fluid, not Static .
My experimentation with Long Shorts is doing okay but under-performing the markets due to the shorts but when it turns around, it is not possible to tell how well it would do. But if market participants have already generated great returns in recent weeks from their long positions, would it be better to liquidate them (especially if they are above what they should be at valuation wise) rather than to protect them using Bear ETFs or even gold. Right now, I would be more inclined for the former because my fear is that when the next capitulation arrives which I believe soon, we may see big and swift drops in prices across all asset classes if the fall is not orderly.
