Glass
28th August 2010, 07:23 PM
Ostrich investors are a major driving force in today's financial markets. As the name implies, they are hiding their heads in the sand like the popular literary perception of the king of birds. Burned in 2008's epic stock-market panic, they have shunned active investing ever since. Trillions of dollars of their capital languishes idle on the sidelines, earning zero in money markets or near-record-low yields in Treasuries.
I can certainly sympathize with them. In the heart of that brutal once-in-a-century stock panic in October 2008, the flagship S&P 500 stock index plummeted 30% in a single month! Elite blue-chip stocks long considered safe failed to weather that fear storm well. Because the economy has been slow ever since the panic, countless investors fear another extreme selling event. They still want nothing to do with stocks.
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It's not a pretty environment out there, so it isn't illogical to hide heads in the low-yielding sands of cash and bonds. Unfortunately for ostrich investors though, this strategy is doomed to failure. While it is challenging psychologically, the active investors braving these stock markets are thriving. Our wealth is multiplying while ostrich investors' is stagnating. Those hiding out too long will never catch up.
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If there was ever an environment that encouraged ostriching, early 2009 was it. If you had moved your capital to cash then, you'd essentially have the same amount today. But boy the opportunity cost of hiding on the sidelines has been staggering. Between March 2009 and April 2010, the SPX blasted 80% higher in a massive post-panic recovery. Believing the pervasive gloom and doom back then nearly cost you a doubling of your capital!
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In 2009 the SPX rallied 23.5%. Yet in our popular Zeal Intelligence monthly newsletter, the average annualized gain on all the stock trades we realized last year ran 45.0%. In our weekly Zeal Speculator, where we trade more often and take more risks, our average stock trade in 2009 enjoyed an 88.9% annualized gain.
As of the middle of 2010, the SPX was down 7.6% year-to-date. Yet our average Zeal Intelligence stock trade closed this year had seen a 73.7% annualized gain (64.8% absolute)! Of course these averages include all our losing trades too, full performance data is always posted on our website.
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As investors we carry a huge burden, we are the financial stewards of our families' futures. If we make wise decisions, our capital will grow and our families' lives will improve. Similarly, poor decisions today will greatly reduce our future wealth. No one cares more about your financial future than you do, your active stewardship is crucial. Hiding out on the sidelines is an abdication of this stewardship responsibility, a flat-out failure. Tough markets require different strategies, not capitulating and cowering.
Provocatively, even the Bible speaks out on this principle of stewardship versus ostriching. Jesus Christ's famous Parable of the Talents is chronicled in Matthew 25 and Luke 19. A nobleman who would be traveling long and far entrusted his servants with portions of his capital. The good servants went out and invested it, growing it for their master's return. He praised and rewarded them. But one servant was afraid, so instead of investing the capital he was given he hid it. He was a first-century ostrich investor!
Far from being commended for returning the cash unharmed, this ostriching servant was called "wicked and lazy" when the master returned. He was effectively fired, with his capital given to a good servant who had wisely invested and multiplied his own capital allocation. While this parable teaches deep spiritual truths to Christians, its literal surface application on the financial front is no less valid. As investors our responsibility, our moral duty, is to multiply our capital, not hide it away.
more at link....... (http://www.321gold.com/editorials/hamilton/hamilton082710.html)
I can certainly sympathize with them. In the heart of that brutal once-in-a-century stock panic in October 2008, the flagship S&P 500 stock index plummeted 30% in a single month! Elite blue-chip stocks long considered safe failed to weather that fear storm well. Because the economy has been slow ever since the panic, countless investors fear another extreme selling event. They still want nothing to do with stocks.
-----------------
-----------------
It's not a pretty environment out there, so it isn't illogical to hide heads in the low-yielding sands of cash and bonds. Unfortunately for ostrich investors though, this strategy is doomed to failure. While it is challenging psychologically, the active investors braving these stock markets are thriving. Our wealth is multiplying while ostrich investors' is stagnating. Those hiding out too long will never catch up.
-----------------
-----------------
If there was ever an environment that encouraged ostriching, early 2009 was it. If you had moved your capital to cash then, you'd essentially have the same amount today. But boy the opportunity cost of hiding on the sidelines has been staggering. Between March 2009 and April 2010, the SPX blasted 80% higher in a massive post-panic recovery. Believing the pervasive gloom and doom back then nearly cost you a doubling of your capital!
-----------------
-----------------
In 2009 the SPX rallied 23.5%. Yet in our popular Zeal Intelligence monthly newsletter, the average annualized gain on all the stock trades we realized last year ran 45.0%. In our weekly Zeal Speculator, where we trade more often and take more risks, our average stock trade in 2009 enjoyed an 88.9% annualized gain.
As of the middle of 2010, the SPX was down 7.6% year-to-date. Yet our average Zeal Intelligence stock trade closed this year had seen a 73.7% annualized gain (64.8% absolute)! Of course these averages include all our losing trades too, full performance data is always posted on our website.
-----------------
-----------------
As investors we carry a huge burden, we are the financial stewards of our families' futures. If we make wise decisions, our capital will grow and our families' lives will improve. Similarly, poor decisions today will greatly reduce our future wealth. No one cares more about your financial future than you do, your active stewardship is crucial. Hiding out on the sidelines is an abdication of this stewardship responsibility, a flat-out failure. Tough markets require different strategies, not capitulating and cowering.
Provocatively, even the Bible speaks out on this principle of stewardship versus ostriching. Jesus Christ's famous Parable of the Talents is chronicled in Matthew 25 and Luke 19. A nobleman who would be traveling long and far entrusted his servants with portions of his capital. The good servants went out and invested it, growing it for their master's return. He praised and rewarded them. But one servant was afraid, so instead of investing the capital he was given he hid it. He was a first-century ostrich investor!
Far from being commended for returning the cash unharmed, this ostriching servant was called "wicked and lazy" when the master returned. He was effectively fired, with his capital given to a good servant who had wisely invested and multiplied his own capital allocation. While this parable teaches deep spiritual truths to Christians, its literal surface application on the financial front is no less valid. As investors our responsibility, our moral duty, is to multiply our capital, not hide it away.
more at link....... (http://www.321gold.com/editorials/hamilton/hamilton082710.html)