The idea is a straightforward strategy to navigate market corrections, identify strong stocks and secure consistent gains. The question you need to ask yourself is simple: do I own a tennis ball or an egg?
When to hold and when to fold?
This is one of the most difficult questions when it comes to investing.
Buying stocks is easy. But when should you sell? I addressed this question in an earlier article. But from time to time the market moves up in a dull way, making it difficult to make decisions.
We are in such a market right now. Goldilocks of sorts, driven by moderate growth and inflation returning down to reasonable levels – the dish is neither too cold nor too hot. Everything turns out to be «just right». Yet, on top comes the fact that the market is starting to be more and more driven by narratives. The leaders of these narratives are rising strongly, while the broad market is just treading water at best.
Only a few stocks provide the performance and outperform the underlying index, while the rest of your portfolio does not move, neither down nor up. The latter are too good to sell, but too bad to ignore. They test our patience.
Does it ring a bell for you this year?
Chart 1: Percentage of S&P 500 stocks outperforming the S&P 500 over the calendar year
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