Hey Guys,
Well the market absolutely fell apart on Friday, and it opened the day lower today. It's been quite a spectacle. At the time I emailed on Friday, I talked about how Jerome Powell had given a speech that morning, and the market was in roller coaster mode. At that time, the market was still strong, but then the S&P 500 dropped 160 points over the course of the rest of the day.
That proved to be a big bruiser for my portfolio. I went from having a lot of green in my portfolio (particularly with my options positions, which were all green at the start of Friday), to having everything in the red. Stoplosses were hit along the way too, including a couple this morning.
I had some uncomfortable feelings come up as a result of the market plunge. One thing that has helped me is to zoom out my focus. In the midst of drawdowns, many of us can have a tendency to over-focus just on the current situation, which makes it harder to live through. But if we zoom out, it can help us get better perspective and perhaps weather the storm a little better.
I can zoom out and appreciate my health, family and friends. And specifically in terms of the stock market, I can zoom out and look at the big picture with this back-tested trading approach. The research covers a period of more than 20 years, and during that time there have been market drops just like this. Those market drops generated drawdowns for the back-tested portfolio as well, so this is nothing new. And despite those drawdowns, if you look at the overall performance, the big picture, clearly the long term results reflect a strategy that might be quite strong.
So it might be the case that we need to be able to weather these drawdown periods in order to benefit from the long term potential of the trading strategy. But there is clear risk involved and no guarantees, and that's what makes it so hard to live through.
This page shows the breakdown of how each individual stock performed in back tests using my trading strategy. That is a page I like to look at during times of drawdown because it helps me zoom out and focus on the long term results.
I picked up new positions in all accounts today. In the main account, I bought ALL and TTD. In the extra options account, I bought options for KR and WM. In the low-priced account, I bought stock for PPL and EQH.
If you have any questions or feedback, I'd love to hear from you.