• Larry McDonald

Learn to Surf and Ride the Market Waves

Updated: May 24, 2019

[G]narley, dude! Sorry, that’s just what comes to mind with I think of surfing. I’ve never been a surfer, but each time I try it I gain a deeper respect for those who know how to catch a wave. Surfers have their own culture, language, mores and code, and they have earned the right to their distinctive lifestyle because they learned to move with one of Mother Nature’s most powerful forces.

But one characteristic of a surfer is that they would never even think of trying to harness a wave – for obvious reasons. From a surging tsunami to the gentle waves that lap at your feet in the Gulf – a wave is a wave is a wave – and we are mere players on the stage of surf. Ride it or survive it, but never tame it. We build sea walls and reinforced piers, but those are ways we only withstand the force but never alter it.

So too when we think of entering the arena of the stock market. Waves crash and so do markets. We should approach both with great respect and a perspective that seeks to move with them, or merely to observe them, but never to battle with them. Left unchecked they will win – every time, because it’s not a level playing field.

Just as a surfer can “conquer” a wave, so too can we learn to listen to the markets and move with the flow of money. This movement is not about having omnipotence, but cultivating diligence. It’s not about absolute certainty as much as resonating with the opportunity.

Riding the Wave is all about properly assessing market opportunity and adjusting accordingly. At the risk of sounding like a broken record, “if your portfolio is always standing still it will eventually get run over.” Just like with surfing, you catch some really great ones, you miss a few, you pass on a few, and some days you simply stay out of the water and enjoy the sunshine, a Mai-tai, and listening to the waves crash before you (but not on you!). The key is to learn which is ripe with opportunity and which is fraught with calamity. Once you do that the odds of greater certainty and success get stacked in your favor. This is as close as you can get to worry-free investing, knowing still that we engage in a very unpredictable arena.

Three of the main ingredients to investing are:

· what to buy,

· when to buy it,

· and when to sell it.

It doesn't take a rocket scientist to figure that out. Executing that process successfully, however, is another story.

All sorts of things cause the best laid plans to go off the rails. Consequently, a total commitment to a workable system you would die on the hill for is critical to thriving and not diving. Of course, if your system is listening to Cramer, or the gang around the water cooler, or your in-law, or the dartboard, or the latest newsletter fad, you might have a problem. Alas, there’s no shortage of ideas for ingredient number one.

But let’s assume for a minute that you somehow manage to wade through all the noise and actually come up with some good stuff to buy. It’s certainly possible if you follow services like Investor’s Business Daily or The Motley Fool, to name a couple of solid ones. Once you know what you are buying, you move on to the ingredient number two of assessing when to buy it. Again, lots of ideas about this step out there in the investing strategy world, and some of them are really pretty good. Good, that is, if your plan is to keep focused on the price movement of the stock, but not so good if it doesn't take into account the overall investing climate you are buying into.

This is the biggest adventure in missing the point in the investing world: To ignore the possibility that no matter how positive the stock price is acting, it may not be time to surf – but to sun – because the majority of waves are cresting at twenty-four feet, and you should sit this cycle out, order a drink with an umbrella in it, and wax your board as you anticipate a better day.

Pretty novel idea, right, and it holds true for ingredient number three – knowing when to sell – as well. Sometimes you need to reduce exposure because of the big picture even though you may think your portfolio that is going Mach 6 is just getting started. Pretty tough swimming against the CNBC current, but do you want to make them (and their sponsors) money at your expense just because it’s a no-brainer and you’ll have someone to blame when it goes south? No, you don’t, and believe me, there’s a better way.

Why would you want to literally give away all control, power and energy to the whim of the markets? The markets are not your friend, and although we look to exploit them to the best of our ability and add value to our lives, the five-hundred mile hidden tsunami wave will eventually find land and surface to wreak havoc and destruction. Having a plan to thrive during those times is why it pays to learn how to surf.

Are you ready for a more relaxed and productive approach to investing? Get started today

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