Timing Long-Term Investments | Podcast Episode #175

0:07
Hey, I’m Ryan Mallory, and this is my Swing Trading the Stock Market. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market, and today’s episode, we’re gonna talk about long-term investing. We’re gonna talk a little bit about swing trading, and today’s email comes from a person, we’re gonna give him a good Florida name, Waylon.

0:47
Waylon writes, Hi Ryan, I’m glad we learned about your podcast and your risk management techniques early in our investment road. I just joined the trading block this past weekend. I haven’t listened to all of your podcast episodes, but I’m making my way through the old episodes right now.

1:04
My degree is in risk management, and I agree with you on what you preach about in your podcasts. Since graduating, I thankfully maxed out my 401ks while in the corporate world. When I started my own business a decade ago, I moved my 401k to a financial advisor and continued to contribute monthly to that financial firm.

1:24
My husband is on a pension plan where he works too. The nest egg that we’ve built with our financial planner is definitely not enough to retire on, but it was what we could afford to do at that time. Over the years, my husband and I purchased 3 homes, 2 were rentals until last week when we sold 1. We are now able to pay off some of the higher interest debt with those funds and some left over to invest.

1:44
We will also have to pay off part of it towards capital gains next April since we won’t be reinvesting in another property. My husband and I have 20 plus years to go before we will be retiring. Now that I’ve hopefully explained our situation, here are my questions. I don’t want to involve our financial planner since he’ll want to put all the money with him, and I want a hand in this.

2:04
He already has a big group of our investment retirement portfolio. We want to diversify the leftover lump sum we now have in 3 different groups. One, a safe and boring group for the money we’ll have to pull out a year from now for the capital gains, then a third of it for swing trading using your risk management approach.

2:22
Then the last 3 into a longer term investment that is also medium to low level risk, but not quite ready to use my swing trading portfolio until I am more confident in doing it on my own. Do you have any investment suggestions for the longer term positions, even using your risk management approach with stop losses, I want some longer term stuff.

2:42
Thanks, Waylon. Now, for the bourbon of choice in this episode. I’m going with Angel’s Envy, Kentucky Straight bourbon whiskey finished in port wine barrels. It’s 43.3% alcohol, 86.6% proof.

2:59
Now, not a huge fan of these things dipping below the 45 mark. That is usually my cut off from what I find to be some of the better bourbons when they start getting below 45 and getting closer to that 40 level, they just don’t hit right. But to the nose, I mean, it has this like nice fruity jam kind of flavor, like, like peanut butter and jelly, like it has like a jelly flavor, and then like the taste of it, it’s really thin tasting.

3:24
I mean, there’s just not a lot of depth to it. I think it lacks a lot of flavor as well. There just isn’t much there on the taste. It’s definitely a bourbon, you know, it’s a bourbon, but has a bit of peppery flavors and the finish has this like weird pine nut flavor. Now, is it a sipper?

3:40
Yeah, and that’s a new question that I’m gonna start asking with these bourbons because I do think that there’s a lot of bourbons out there while they’re not great, great bourbons, you know, on the weekdays, they can be a decent sipper. And Angel’s Envy, would I consider it a sipper? Yeah, I mean, I think for the price, I got it.

3:56
Sam’s Club for $43. I think a lot of places, they sell it for $50 to $60. I don’t even think I’d really be tempted to pay $43 again for it. I like the Angel’s Envy Rye. I think that’s a pretty good one. It’s not even a bourbon, but it’s pretty good whiskey. This one finished in port wine barrels.

4:13
I’m not a huge fan of it. I’m gonna give it a score of 5.9. Now, back to Waylon. Waylon’s asking about long-term investments. Now, long term investing is tricky because when you get into long-term investing, it may not be the best time to start long-term investing. Unlike swing trading, you kind of can jump right in there regardless of the market that we’re in doesn’t necessarily mean you want to be super aggressive if the market’s tanking or.

4:37
If the market’s just going sideways, but there’s usually opportunities for you to grow and learn. Now, in a market where we haven’t really seen any kind of significant pullback where we’re really showing the signs of running on fumes right now, doesn’t mean that we’re going to sell off tomorrow or the next day or even the next week or month.

4:53
But we’re showing where the reward doesn’t really match up to the risk that you gotta take on a long term investment. Now, the S&P 500 it’s trading a little over 4000. Let’s say that we think that the S&P 500 can still go to 5000. Well, what’s the downside risk if it sells off?

5:09
Well, the downside risk if it sells off, it goes back below 4000, maybe it goes down to somewhere in the lower 3. So is that move from 4000 to 5000 really justified if it can go from 4000 to 5000 back to 3000. Now remember, long-term investing a little bit different.

5:25
Yes, you still want to use risk management, you want to have a line in the sand, but you’re not using like stock losses of 3 or 4% because it’s a long-term investment. And there’s usually a fundamental basis involved there too that you believe in the stock, what they do, that they’re gonna be around for a while. I’m not a huge fan of taking flyers on stocks that have a very good chance of being bankrupt in a few years, like a penny stock or just a stock that’s going through some very difficult financial times.

5:51
My favorite long term investing strategy is honestly to buy when there’s just ultimate panic in the market, extreme panic like what we saw back in March of 2020. The time before that was quarter 4 of 2018. So since 2018, you’ve had two opportunities to really add some good, good long term investments, in my opinion, or to be aggressive on the long-term investing front.

6:12
If you’re looking to get into it right now, with the market running the way it is, where there’s just a lack of conviction to really want to push the market higher, yes, we may make more all-time highs in the market, but what is that really gonna do for stocks? Are we really gonna push way beyond the current all-time highs to 5 or 6000?

6:28
I don’t see it as likely. Now, ultimately, do we push that high? Yes, but do I think that there’s a better opportunity? To take that same kind of capital that you have prepared for long-term investing and be able to get more shares because you’re buying it at a lower price, yes, I think that’s a great opportunity too.

6:44
So long-term investing, I mean, you think sometimes swing trading requires a lot of patience because you might go one or two days. I’m sitting on cash right now in my long term portfolios just waiting for a market pullback for a real market correction, one that actually puts some fear in traders’ heart.

7:00
Like, is this the big one? Like, I want to see that happen. Now, I use an indicator called T2108. It’s available through TC 2000’s trading platform. I’m sure you can find variations of it or even create your own on other platforms, but what this does is measure the percentage of stocks trading over their 40 day moving average.

7:17
And when that indicator starts getting into the single digits, that’s usually where I like to start making new long-term investments. And when I’m getting into the long term investments. I want to go after these really, really good stocks, historically good stocks that have just taken a beating, not because their company all of a sudden sucks, but because the market sucks and the market’s pulling it down along with all the other stocks.

7:37
So stocks like Apple, if you can ever get it on these big pullbacks where it offers you some prime opportunities to invest in it, that’s where you’re going to make some of the best gains of your life is when the market is at its worst. And so for me personally, I haven’t made a lot of long term investments of late.

7:55
I like to play around sometimes with dividend stocks and I’m in different strategies and everything, and I’m doing that. But also too, what I would tell people to try out just to be able to stay in the know, to be able to learn and to find out what the swing trades are, what the market conditions are, check out swing trading the stock market.

8:10
It’s my website that goes along with this podcast. Each week you’re gonna get just tons of information from updates from the S&P 500 to the Russell 2000. NASDAQ 100, you’re also going to get updates on all the FAANG stocks Facebook, Apple, Amazon, Netflix, Google, Microsoft, and Tesla.

8:26
And that way when there is a significant pullback and you’re looking at stocks like the FAANG stocks to get long on because they’ve seen the 30% or a 40% correction, you’re gonna have all the technical analysis you need for that. Plus, I’m gonna give you giving you my daily trade setups each and every day. I’m going to be giving you guys the most intriguing charts that I come across each and every day as well.

8:44
So check that out, swing trading in the stock market. But back to Waylon here, long term investing has different rules from swing trading. Now, you still have to manage the risk that’s a common denominator. But a lot of times the long term investing, you have to have a bigger window, a bigger area for the stock to be able to play around.

9:01
Now, one of the things that I like about buying in extreme panic situations is that a lot of the selling has already been done and so a lot of that selling has already been exhausted. So when you start seeing the indicator like the T2108 getting into the single digits where you’re getting like a 3 or 4% of stocks still trading above the 40 day moving average, that tells you right there, there’s not a lot of selling left to do.

9:23
And this doesn’t happen all the time. It doesn’t happen overnight, these kind of indicator readings. They happen maybe like once every couple of years. And so you need to be watching the market when the market pulls back. You gotta be ready. You gotta have some powder dry. You don’t want to be blowing up your account at this time.

9:38
That’s why swing trading is important to use those stop losses, because if you’re not, those swing trades that you made at all-time highs become all of a sudden long-term investments because you didn’t manage the risk. Stocks start falling, you’re down 40% on some of these trades, and then you have no choice but to make it a long term investment and just pray to God that it comes back.

9:56
And that’s a horrible trading strategy, guys, don’t do that, especially, don’t double down. Never double down in a falling market, never double down in a good market. There’s just no market to ever double down and everybody seems to do it still. I’m just trying to tell you. It’s a losing strategy. Now they have some of this money in their accounts and you know if this is me, what would I do you know if I’m wanting to learn how to swing trade and use some capital.

10:18
Well, first of all, people who start and only do paper trading, it’s easy to get a false sense of security because you don’t feel the emotions that come with the trade. But even if you’re just trading a few 100 bucks, you can still feel the emotions of those trades. But what you wanna do is when you’re learning how to swing trade for the first time, it’s important, especially in an environment where the commissions are free.

10:37
At least here in the United States, to trade a capital amount that will make you comfortable. And really that should be the case for everybody in their trading capital. I mean, the capital that I trade and the amount that I trade, I’m very comfortable with it. But when you’re first starting off, you need to be extremely comfortable with it.

10:54
Doesn’t mean that you won’t still feel emotions about losing at times, but that money that you’re putting to work, you need to be comfortable with it, that it’s not too big of a deal, and then as you get more and more comfortable with swing trading, you build some of that confidence up incrementally increase your position sizes, but you don’t want to increase it to like where you’re trading 40 or 50% of your capital on one single position because then that’s just totally nuts because you may not have had ever a significant drawdown or where you get a bad news event that’s beyond your control and if you’re trading 40 or 50% of your capital on a single trade, that gets pretty bad.

11:26
So, here’s the thing, trade what you’re comfortable with as you’re starting off swing trading and in the case of Waylon here, yeah. Dive into swing trading, but don’t think that you have to trade all of your capital right now or go into these ideal situations of what you would like to trade ultimately from a position size standpoint with your swing trading.

11:45
Start off small, just get comfortable with it, get comfortable with the platform, get comfortable with making those trades, planning out your trades, just putting that strategy together and as you get more and more confident, add some more capital to the positions, increase the position sizes, but don’t go too big because a lot of people get sucked into that.

12:02
They start doubling down and they go too big or they just think that they’re better than they really are. Never assume that you’re a good trader. I mean, honestly, don’t ever assume that because when you start to assume that you’re a good trader, that’s usually when the market will humble you. Always respect what the market can do to you and the damage that it can cause for you.

12:19
And when you do that, then you’re gonna always be cognizant of that and you’re gonna manage the risk accordingly. And I’d say another thing too, the stock market over the last couple months, maybe 3 months has been really boring actually. I mean, yes, you’ve got some crazy stuff going on in the crypto world and the memes and stocks and everything else, but a lot of your stocks that really led the market in 2020, like your tech stocks and your growth stocks, they have really struggled of late.

12:42
They’ve come off of those highs, they’ve traded sideways for a good part. I mean, you take a lot of these same stocks like Amazon, like Apple, like Netflix, they’ve been trading sideways for a very, very long time now, and they haven’t broken out, they haven’t broken down. And they haven’t provided you a lot of opportunities, but that same situation has applied to a lot of the tech stocks and a lot of your growth stocks.

13:03
But when you get bored in the stock market or you hit a period of where it starts getting boring, don’t go chasing after the thrill. A lot of people right now are chasing after these meme stocks, and I’ve said this before in another episode, and I feel like it bears repeating again for every big, big, big winner with these meme stocks, whether it’s AMC, whether it’s GameStop or Build A Bear or BlackBerry or whatever.

13:26
It’s cute what they’re doing. It’s fun. Look, nobody likes seeing the hedge funds get torn up on the short squeeze more than I do. I like it. I think they manipulate the markets plenty themselves. It’s fun to watch them squirm in their seats, OK? But just from a practical standpoint, don’t get caught up in the cause of it, you know, people are like, oh, this is our opportunity to really stick it to Wall Street.

13:47
Well, guess what, there’s gonna be people who make a lot of money off of GameStop and off AMC, but it’s not gonna be because AMC went to $100,000 a share. I mean, think about it. If it was to do that, it’d be worth $44 trillion. There would probably be trillionaires created out of AMC if that was to happen.

14:05
That would make it 22 times bigger than Apple. It’d make AMC the largest company by 22 fold that ever existed. So, I mean, break it down to reality of what we’re really dealing with here and remember, you know, somebody makes millions and millions of dollars and cashes out of AMC, which they should do.

14:24
They’re gonna be selling that to a lot of people who still think it’s a good time to be getting in. And what does that mean? It means that it’s gonna be creating thousands upon thousands of people who will ultimately lose on stocks like AMC and all these other meme stocks. So for like one big winner, like Roaring Kitty with GameStop and everything when he sells a position, he’s not selling it necessarily to the big funds.

14:45
Usually they’re the ones that are trying to stay away from this craziness, but they’re selling it to a lot of retail traders, so they’re offloading their shares to the people who deemed them a hero, so that they can lose instead of Roaring Kitty or whoever the people who are making a lot of money with AMC.

15:08
So remember, lots of people are going to lose on these meme stocks, even though you’ll hear about the people who’ve made millions and became billionaires and whatever. There’s thousands and thousands of people that had to lose in order for that to happen because they had to offload those shares to make those gains a reality.

15:24
Just keep that in mind, guys. That’s gonna do it for today. We talked about how swing trading, we talked about long-term investing and timing, in particular, quite a bit. I think it was a pretty good episode with you guys. Please make sure that you leave a 5-star review for me in the Apple podcast app or whatever.

15:48
For you’re listening to those things mean the world to me. They really do. They continue to help me to build this podcast platform and to be able to provide you with excellent content each and every week and also make sure that you continue to send me your questions about the stock market, about trading long term investment.

16:11
I love your questions. You guys give me so many great ideas podcast after podcast. Keep sending them to me, ryan@shareplanner.com. I do read them all, love hearing from you guys. Thank you and God bless. Thanks for listening to my podcast, Swing Trading the stock market. I’d like to encourage you to join me in the SharePlanner trading block where I navigate the stock market each day with traders from around the world.

16:32
With your membership, you will get a seven-day trial and access to my trading room, including alerts via text, email, and WhatsApp. So go ahead, sign up by going to shareplanner.com/tradingblock. That’s www.shareplanner.com/trading-block, and follow me on SharePlanner’s Twitter, Instagram, and Facebook where I provide unique market and trading information every day.

16:52
If you have any questions, please feel free to email me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.