Kirk, Are You Bullish or Bearish?


It is amazing how often I am asked if I am bullish or bearish. This reply sparked this article.

What does bull or bear mean?

Being bullish means you think a security or the stock market in general will go up. Likewise, being bearish means you think they will go down. [Wall Street Words is a great book for definitions of these terms.]

Stop hedging. Are you Bullish or Bearish?

The easy answer is, "who knows?" I don't know what the market is doing in the short or intermediate term. Over the last 200 years, the stock market has gone up so investing in it has been a good thing to do. I also know that stocks have always outperformed all other asset classes over this 200 year period if you hold for 20 years, even if you bought at the very worst time.

So over a 200 year period, I know with 99.99% certainty that the stock market will be higher. Any time less than that, I rely on asset allocation to tell me when to buy and sell.

Buy Low and Sell High

There is no simpler "trick" to making money that to buy low and then sell high.

I keep a roughly constant asset allocation. If the market goes down, then my equity allocation is under target and I buy equities using some of my fixed (cash, bonds and/or CDs) allocation to bring me back to target.

Similarly, if the market goes up, then I sell some of my equities to increase my fixed income amount and get back to my target allocation.

Even if the market goes nowhere for a few years but spends some time up and some time down, then I make money because there will be some buying low and some selling high. I explain this in more detail in the article Using Asset Allocation to make money in a Flat Market

Wall Street Words

Bullish and bearish are words Wall Street made up to help them churn accounts to generate commissions. Read "Where are the Customer's Yachts?" to learn more about this phenomenon.

If your average price for dollar cost averaging into the DJIA for the past 20 yrs is maybe 4,000 then what do you care if the DOW hits 12,000 then makes a trip to 6,000 then settles back at 7% annual growth from say 9,000? You'd still be up over the long term and you can ignore all the silly advice from the hucksters of the World who tell you to buy stocks they know are poor investments.

The copyright of the article Kirk, Are You Bullish or Bearish? in Investing/Personal Finance is owned by Kirk Lindstrom. Permission to republish Kirk, Are You Bullish or Bearish? in print or online must be granted by the author in writing.

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