Perhaps I'm asking for too much? Given the rampant chaos that is all around us it would seem that to achieve any portfolio balance would be an overly-ambitious wish. However, I'm not seeking balance in the traditional, market-neutral sense of the word. I'm seeking balance in the fact that we are up significantly enough for the month that I can push for alpha from both sides of the market. This means that when short opportunities pop up, I'm going to be swinging with the intention of busting the pinata wide open.
And that's what experienced investors should do. It's imperative to leverage gains to create further gains. Too many investors look at alpha as a almost a rarity that must be preserved and cherished. Alpha is a tool to create more alpha, not to be squirreled away for fear of irreversible loss.
In my case A Zen-Like Balance encompasses seeing the markets well enough to be able to capitalize from both sides of the volatility coin.
With that said, I initiated some shorts today: MCO, C and NVDA to start. I have a few more candidates behind them. I also shed more of our long exposure. If you'll remember, last week I started taking down our tech exposure with the idea that the markets were getting ready to change the game just when investors were getting comfortable.
I continued shedding our aggressive long exposure by taking a small profit on our INTC position and a small loss on our position in Z. Our defensive longs are performing well for us, as one of our larger positions - ALL - was green on the day and we even managed to see one of our tech names - PAYC - close in the green during what was an all around bad day for equities.
Investors basically have two ways to approach every market environment: In a proactive manner or a reactive manner. There are some circumstances, like being long in 2017, where being reactive works. The markets weren't difficult then. They were an amateur investors dream. A lollapalooza of sorts where smiles, neon bracelets and equity gains were being handed out like drug laced candy.
Now that the anomalous ease with which investors became all too comfortable has passed, investors are forced to become proactive. In other words, it's an environment where those who are familiar with the terrain will excel. Those who simply react to obvious data points will fall flat. This will be a consistent theme for sometime to come.
My decision to get begin scaling into short opportunities was a proactive one that allows us to take this exposure while our overall risk remains reasonable with an outsized reward potential. Being reactive only skews that formula where risk increases and reward diminishes. Picture perfect example: Those who weren't willing to embrace the fear to get long in late December and instead decided to begin buying stock last week, after earnings made them feel "safe." A reactive psychosis that desires comfort in speculative decisions has no place in an investors arsenal.
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