When I teach my coaching clients, willing friends, colleagues, host webinars, write articles or even answer emails, calls or texts it gives me a great chance to offer some of my knowledge and experience.
Unlike some methods, I will often respond to questions with another question(s) (in a similar fashion to the Socratic method). You see, it is my goal to help you find the answer yourself. Oh sure, I can tell you the right answer but is that learning? The fun is discovery and nothing better than figuring it out on your own.
I had a conversation with a colleague last week about protecting positions. His portfolio is long stocks and has performed incredibly well this year, clients are extremely happy.
With the potential of a correction that could bring stocks down a 3-5% he wondered whether it was time for some short leveraged ETF’s (like the SH). This would clearly be done to protect his long portfolio from any large adverse moves.
As I asked him questions about what he wanted to do it appeared to me that he expected further downside from Friday. That makes sense, but to buy when the market is already down? I asked if his intention was to make money or just protect – he said ‘no difference’.
I get that, but asked him if it would not have been easier buying the prior day, when the markets were flying high and protection was cheap? The answer was yes, it was.
[tentblogger-youtube 26uFhClbjys ]
The point I’m making here is to understand where you are at all times – if possible, and make the moves that make you least comfortable.
Ask questions all the time of what you are doing, where you are going and how you can improve yourself. A momentum or trend trader has difficulty reaching for puts, shorting stock or buying an inverse ETF when the markets are up 1% or more in a day.
I’m often right there with them, believing the trend plays out longer than I could imagine. It’s not an easy thing to do but is a move that keeps you in the game when uncertainty is high. In this case, why not buy the insurance before something bad occurs? Would you buy fire insurance when the flames started to hit your roof?