Lead-Lag Live: Portfolio Construction Past the Melt-Up
Investors who think for the long-term can get fantastic results. Looking past the market’s daily swings can lead to a better understanding of where value is. More importantly, it can mean identifying opportunities for massive returns that take years to play out.
Thinking systematically is key. That involves creating a set of rules to determine your investment allocation and risk. Building such a set and sticking to it helps with long-term investing.
Systematic investors have the discipline to follow a strategy. That can give them an edge over emotional traders in the market. Many traders get hurt investing because they get overly pessimistic during down markets. They sell out when they should be buying more.
Meanwhile, market optimists tend to stay invested too long during a bull market. They end up losing big paper gains when the market turns.
That edge appears over the long term, not necessarily within a single market style.
Meanwhile, the stock market is being set up for a melt-up next year. Once the Fed pivots on its interest rate hikes, it’s possible that assets such as stocks, bonds, and cryptos could soar.
Investors who come up with a strategy to take advantage of that melt-up will be able to grab gains. More importantly, they’ll be able to keep most of those gains when the melt-up ends and many big returns start to stall out.