Larry Connors Daily Battle Plan: Why Active Management Beats Buy and Hold
Good morning.
I’m sure most of you know of the study that journalists and the “buy and hold” crowd like to reference where they show how if an investor sat out x amount of days in the market on the days of the biggest gains, they would missed the majority of the gains over the past century.
A lesser-referenced study (which the “buy and hold” crowd somehow forgets to refer to) is the one that shows how you would have performed had you sat out the x amount of days where the market had its biggest losses. The gains for the portfolio are eye-opening.
Yesterday the market had its largest one-day loss in nearly a year. The Daily Battle Plan Model Portfolio, and the majority of the portfolios built by traders who rely upon The Machine to manage their money, were in all cash or nearly all cash (depending how the portfolio was constructed).
Buy and hold lost 2.25% for the day. Active money management, especially money management that applies many years of quantitative research and combines it with proper position sizing and professional risk metrics, is a superior way to manage ones money. Yesterday was another reminder of why this is.
Tuesday’s market which closed extremely overbought has now led to this morning’s market which is extremely oversold. I mentioned yesterday that whenever in the past we have seen the 2-period RSI reading of our Country Fund Universe above 95, it has historically let to pullbacks within a few days. Now with the pullback in place, the opportunity to begin scaling-in again has arrived.
The above is from Larry Connors’ Daily Battle Plan. To learn more about the Daily Battle Plan – including access to Larry’s daily ETF trading signals, click here for more information.
Larry Connors is founder and CEO of TradingMarkets.com.