ARKK's round-trip and investor timing … the flaw in buy-and-hold … a suite of tools to help investors with these challenges … is a "Great 2024 Sell-Off" coming? What’s another name for one of your core, long-term stock holdings? One of your speculative, short-term stock trades that went wrong. Credit for that slice of investment humor goes to Brian Hunt, InvestorPlace’s CEO. If it gave you a little chuckle, it’s likely because it hits close to home. It does for me. My investment history is littered with examples of doing the wrong thing at the wrong time, with this specific example of keeping a losing trade in my portfolio for too long often repeated. I’m betting you have a few similar black eyes in your past. In Wednesday’s Digest, I wrote “you don’t always need a better stock – better management of the stocks you own can do wonders.” Let me offer an example to drive this home. Cathie Wood's ARK Innovation ETF (ARKK) became a standout investment during the pandemic This was due to its bold bets on market darlings such as Zoom, Coinbase, and Tesla. The fund produced an eye-watering return of 153% in 2020 alone. As you’d expect, investors stampeded into the ETF, looking to get their piece of this extraordinary market performance. At one point in 2020, ARKK became the largest active ETF in the market, valued at nearly $30 billion. But ARKK flew too close to the sun and subsequently crashed in 2021 and 2022. For a visual on this, below, we look at ARKK’s five-year performance. It exploded roughly 250%, then lost it all – and more. The ETF is now up just 8% in five years.  ADVERTISEMENT  The AI boom is no longer a rising tide that lifts all boats. Take Super Micro Computer (SMCI) as a cautionary tale. Once a shining star of the AI boom, has now plummeted nearly 70% from its highs. Now, you have to be selective, strategic, and informed to secure the kind of returns you’re looking for. In late July and early August, Luke Lango and his team pinpointed a series of high-potential AI stocks that have already delivered substantial gains—up to 40% or more in just a few short weeks. While SMCI has faltered, these carefully chosen stocks have thrived. The lesson is clear: In today’s AI-driven market, success isn’t about picking just any stock; it’s about picking the right stocks. Don’t leave your financial future to chance. Click here to ensure you’re on the winning side of the AI revolution. | So, what does a study of the average ARKK investor reveal about how they fared during this rollercoaster? Did they manage their investment wisely, getting in early and getting out near the top, cashing in 200%+ returns? Perhaps they fared a little worse, but still enjoyed a nice profit? Here’s Morningstar: Because of the timing of cash flows into the fund, the returns shareholders have actually experienced have been significantly worse [than ARKK's overall returns] …
…Using updated data through May 31, 2023…after adjusting for the timing of cash inflows and outflows, we estimate that shareholders suffered a 28% dollar-weighted average loss for the trailing three-year period, which is more than twice the fund's reported loss over that span…
But it is the dollar-weighted returns since the fund's late 2014 inception that paint the most alarming picture…
ARKK's 9.59% annualized return over its full life span has outpaced that of the average mid-cap growth fund by about 1.6 percentage points per year. But after adjusting for the timing of cash inflows and outflows, we estimate that investor returns were far worse—instead of enjoying positive returns, dollar-weighted returns were sharply negative. Despite ARKK being a huge triple-digit winner at one point, the average investor’s returns were “sharply negative.” The truth is that it’s not so much the investment that matters, it’s how we handle the investment. After all, what good is a winning stock if we have a losing stock management system? Too often, "buy and hold" becomes a cop-out for a bad decision It’s an easy way to shove painful volatility (or bad market choices) under the rug. Oh, you’re doing 37%? Well, you’re holding a super strong company. Just ride it out. Okay, well, how did that work out for investors in Eastman Kodak… or Blockbuster… or Enron? But those are extreme examples. What about a great company that’s not going to go bankrupt, it’s just headed for a crash alongside the broad market? Well, if buy-and-hold is your strategy, get ready to roll the dice. On one hand, you could find yourself invested in a company like Amazon. After peaking in December of 1999, the future tech giant crashed, losing roughly 95% by September of 2021. Would buy-and-hold loyalists have been rewarded? You know the answer but let me throw in a few other details. In the decade following the Dot Com meltdown, Amazon went on to suffer a 50% haircut in both 2006 and 2008. Imagine the stress trying to hold through that run from 1999 to 2008. Of course, if you had, then based on buying Amazon at its peak in 1999 – then losing 95% and then 50% twice – you’d still be up more than 3,500% today.  So, buy-and-hold is the way to go, right? Well, Cisco’s (CSCO) investors in 2000 certainly believed so, and for good reason… Heading into 2000, Cisco had been printing money, riding the Dot Com boom. It was one of the most valuable, profitable companies in existence. In fact, in March of 2000, it boasted the largest market cap in the world. Cisco was as “blue blood/buy-and-hold” as it gets for tech companies – far more so than upstart Amazon. So, what did buy-and-hold do for loyal Cisco investors? Well, if we exclude dividends and inflation adjustments, and look purely at price action, CSCO’s buy-and-hold loyalists are still waiting for their reward (ignoring a couple fleeting moments of gains) …  If you were banking on this tech blue-chip to fund your golden years, well, better push back that retirement date. Bottom line: Yes, “buy-and-hold” is a powerful long-term strategy for wealth building…if you own an “Amazon” not a “Cisco.” In real time, can you tell the difference? If not (which no one can), then perhaps it’s time to incorporate some investment strategies that help address this challenge. ADVERTISEMENT  Are we on the edge of the biggest ‘TECH RESET’ in decades? The expert who called the dot-com crash of 2000, says: This is why a staggering 31 billionaires are selling their stocks, right now, at a record pace. Click here for the step-by-step details. | As we noted in yesterday's Digest, this coming Tuesday, our macro expert Eric Fry is holding a special live event While it will highlight several headwinds that are all converging in the markets right now, the evening will also spotlight our topic today of trade management. From Eric: Most people get into investments with a destination in mind… but no plan for how to arrive at their destination with their profits intact.
You see, the decision to enter an investment or trade is just Step 1 of the process. I daresay that's the easy part.
The steps that follow, however, are even more important. Trade management can make the difference between generating large gains…or large losses. But let’s not kid ourselves, this is incredibly hard. Market analyst and author Ben Carlson has a great piece on the topic that highlights the contradictions we hear when it comes to trade management. He begins by discussing the advice that experts give about rebalancing your portfolio: Sell your winners to buy more of your losers? That's like cutting your flowers to water your weeds.
But no one ever went broke taking a profit. But also let your winners run.
OK, so sell your losers and double down on your winners? Why would you be fearful when others are fearful? Why would you run out of the store when there's a sale?
And if you do sell a winner or loser, do you sit on the cash for a while to wait for a fat pitch?
What if the market gets away from you? Do you put that money into a new name or another holding in the portfolio?
What if the valuations aren't so compelling? Do you have good answers here? I don’t. Neither did the "worst investor in the world" who will be joining Eric next Tuesday As I noted in Wednesday’s Digest, this special guest was so plagued by questions such as the ones above that he created a series of investment tools to improve his market results – while also making the process simpler and less stressful. Eric took these tools and back-tested them on his multi-decade track record. He found that his already impressive results would have improved substantially. You’ll get more details on Tuesday, along with why Eric believes we’re entering a period for stocks in which the need for such tools is ramping up dramatically. From Eric: We are on the precipice of a series of huge, market-changing events: recession rumors, one of the most contentious presidential elections in U.S. history, the staggering cost of living, and more. It’s all a perfect storm for a tumultuous stock market.
However, this isn’t all doom and gloom. There is a way to emerge in a stronger financial position than you are today…
That’s why on Tuesday, September 24, at 8 p.m. Eastern time, I’m going live with some of the best tech minds in the business.
In a special event we’re calling The Great 2024 Sell-Off, we will reveal what I believe to be one of the most critical trade-management tools out there. You can click here now to reserve your seat for that event. Bottom line: Too often, it’s not the stock that matters, it’s how we manage the stock. If you want the latest in trade management technology at your side, put Tuesday’s event with Eric on your calendar. I’ll give him the final word: At The Great 2024 Sell-Off event, we’ll show you how this technology can help you can squeeze out the maximum profit potential from both your current and future trades…
While also alerting you to the next big selloff…before it occurs.
It all happens at 8 p.m. Eastern time on Tuesday, September 24.
Please don’t miss out on this opportunity.
Have a good evening, Jeff Remsburg | 
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