For the most part, there is an inherent buy-side bias when it comes to financial markets. This occurs because of the fact that most people invest in retirement accounts by either purchasing mutual funds, or buying the shares of the companies they work for. Although allowed in some types of retirement accounts, trading in derivatives such as options or futures is very uncommon as most don’t have the know-how required and thus never trade these instruments.
This means that these buy-side only folks have a chance at positive returns only when the market is moving higher. So what can these investors expect when the market moves sideways or down? Well, in a downtrend (commonly known as bear market) this contingent suffers. They bide their time hoping for the next bull market to emerge, and when the market is range bound, dividends are the only returns to be had.
Having a strategy that profits in all market environments is of course critical for long-term success. Knowing when to… Continue Reading
