Day 141: Remember this Chart!


The Mother's Little Helper portfolio was up +0.13% today for a gain of +940.78. Overall gain to date: +$120,110.13 (+20.57%). According to CNN Money the S&P 500 is up +7.23% Year To Date (http://money.cnn.com/data/markets/sandp/).

The overall theme of this blog has been Invest on your own and stay invested. The chart below is my favorite because it shows why you should stay invested and how to recognize when you should be holding more cash in your account. A big Shout Out to First Trust for creating this infographic and of course recognition of their copyright to this gem.

The upward trending blue sections are bull markets, the downward trending orange sections are bear markets and the vertical light orange stripes show recessions. Take particular note of the duration of bull markets and the duration of the bear markets. Also note that we can be in a recessionary period while still enjoying a bull market. I think the reason most investors react the way they do is that a bull market grows in fits and spurts over several years, while the drop to a bear market happens suddenly, without warning and then drags steadily lower over time worsening the pain and increasing fear. The bigger lesson is don't ever try to time the market and don't believe in the idea that the markets can drop to zero. Also, know the averages but don't play them. If an investor had used the averages to decide when to be in or out of the market the results would have been disastrous. Bull markets have lasted 8.9 years on average. But using that logic an investor would have exited the market too soon in 50% of the bull markets since 1926 and stayed in too long in the other 50%. Likewise that same investor following the averages would have entered the market too soon in 50% of the bear markets and missed the bottoms in the other 50%. Don't be average.

In the market crash of 1929 most investors were not able to stay invested because the majority of investors were using margin (borrowed money) to purchase stocks. Buying on margin was so popular that in the late 1920's, roughly 90% of the share price of stocks was made with borrowed money. The U.S. saw this borrowing, buying and cash flow as an industry to encourage. Prior to the the crash in 1929, nearly forty cents of every dollar loaned in America was used to buy stocks. When the dreaded margin calls came they couldn't raise the cash to cover their margin calls and ended up loosing everything which dramatically worsened the crash, bringing down individual investors, investment houses, banks and businesses that had extended credit to these investors. Everything was floating on borrowed money; sound familiar? Since then regulations have been put in place that prevent margin investing at those levels. Looking forward bear markets should more closely resemble the down turns we've experienced since post World War II.

Stay Invested,

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell share withing the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved