Sorry Pavel, my crystal ball is broke (as you noted) LAC SP broke all resistances and in a “Breakout” again fueled by all the events we know. Add to this overall stock market situation and we all drunk in our success, but my friends and family do ask me when correction will happen? Eventually it will, here is a good insert:

“The markets can remain irrational longer than you can remain solvent.”

Does any of this mean you should sell everything and go to cash? Of course, not.

But you can take control.

Why Investing Is Like Gardening

The biggest mistake that investors make in the stock market over time is failing to manage investment risk. I have found over the years, the concept of “gardening” tends to resonate with individuals when it comes to portfolios management.

Investing has a lot of similarities to gardening. In the “Spring,” it is time to till the soil and plant your seeds for your summer crops. Then, of course, the ground must be watered and fertilized, and weeds pulled. Otherwise, the garden won’t grow. Then, as the “Spring turns into Summer,” it’s time to harvest the bounty the garden has produced and begin to rotate crops for the “Fall” cycle. Eventually, even those crops must get harvested before the “Winter” snows set in. 

Therefore, to have a successful and bountiful garden, we must:

1. Prepare the soil (accumulate enough cash to build a properly diversified allocation)
2. Plant according to the season (build the allocation based on cycles)
3. Water and fertilize (add cash regularly to the portfolio for buying opportunities)
4. Weed (sell loser and laggards, weeds will eventually “choke” off the other plants)
5. Harvest (take profits regularly otherwise “the bounty rots on the vine”)
6. Plant again according to the season (add new investments at the right time)

Just like all things in life, everything has a “season” and a “cycle.” When it comes to the stock market, the seasons are dictated by “technical constructs.” The long-term “cycles” are dictated by “valuations.”

Currently, as noted above, the “technical constructs” are warning us we are late into the “Fall,” and “Winter” is approaching.