How To Beat Wall Street Taking Minimal Risk Featuring UFC George St-Pierre
He is one of my favorite UFC fighters and it's not just because he's Canadian. Ok, we are both Canadians and that makes both of us awesome, fine, one of us is awesome. Sorry GSP :)
All joking aside, what on earth does Georges St-Pierre have anything to do with BehindWallStreet.com and the world of stocks, bonds and ETFS you might ask?
The answer my friends is very simple, do what Georges St-Pierre does, he has a game plan to win the fight while taking the least amount or risk and damage.
MMA (mixed martial arts) better known as UFC (Ultimate Fighting Championship) is a type of personal combat where the fighters use different fighting techniques to kick their opponent's 'arse'.
Fighters are often characterized as:
1.Submission experts (Jiu Jitsu)
2. Wrestlers (not the WWF/WWE type)
3. Standup fighters (use kicking, punching, kneeing, elbowing).
The reason why Georges St-Pierre is the UFC Welterweight Champion (also in the discussion as the best pound for pound fighter) is that he is a master or all 3 fighting styles.
GSP will use wrestling against fighters who's strength is stand up fighting.
He will use stand up fighting against guys who are submission experts.
He will use submission techniques against anyone he can wrestle to the ground.
What does this mean? GSP has a really good chance at winning his fight while taking the least amount of damage because he can tailor a game plan so that he takes advantage of the opponent's weakness.
Now how does all of this apply to the stock market?
It very simple. Find a way to make money the easy way without having to suffer heavy financial loses.
Let's take a look at the long term chart of SPDR S&P 500 ETF (NYSE: SPY).
What would Georges St-Pierre do in a bull market?
He would keep fighting his standard way (wrestle because that is always his biggest advantage), wear down his opponent and score easy points with takedowns. Sure it's boring as hell to watch but that's called being smart. He wins the round, hurts his opponent and saves damage to his pretty face.
GSP would buy the strongest stocks and realize that taking on short trades comes with a lot of risk.
He would still short the weakest stocks just so his portfolio isn't weighted all to the Long side. Think about this way, GSP throws a lot of jabs and faints just to keep his opponent off guard. He isn't trying to win with just his jab, he is just doing that to keep his opponent honest and guessing at all times.
We never know what the market direction will change so having a few short positions will add diversification to your portfolio.
The Bear Market is the time when the average investor and money manager gets killed in the market because that's the time when the markets go down.
Yes, the professional money manager gets killed too. Why is that? Most believe that the price of the stock market always go up and they don't adjust their investing strategies (long stocks only) when the market starts going down.
Did your portfolio get decimated in the 2008-2009 stock market crash? If yes, you are part of the vast majority who got crushed by the bear market. Why did you lose? It's because you didn't believe that the stock market could ever go down and you used the wrong strategies of Buy and Hold and Diversification to control your portfolio's risk.
What would Georges St-Pierre do in a bear market?
He would realize that he wasn't winning the fight the easy way and that he was taking too much damage and he would adjust his original game plan. If he was getting hurt during the stand up exchange then he would resort to wrestling.
GSP would to go SHORT the weakest stocks and wait for bargains and buy the strongest stocks only after they stopped going down, based and started to go up again.
GSP just goes with the flow, he funds the path of least resistance to win the fight. Does this remind you of how Peyton Manning plays the QB position?
Peyton Manning simply takes what the defense gives him.
If you want to find the path of least resistance of the stock market then check out our Flagship and ETF Newsletter.
If you ever find yourself in a street fight, harness your inner George St-Pierre, look for your opponent's weakness, say a few French words to distract him and do what Joel Laceda would do, kick him in the nuts and run away while your opponent was squirming on the ground.
Sure you'll be lesser of a man but at least you get to leave the street fight while taking on the least amount of risk and damage.
Hold on, isn't that what George St-Pierre would do?
You are slowly learning my little grasshopper. Learning and Laughing, that's just how I operate.
Enjoy UFC166, watch the Heavyweight Championship on Saturday October 19, 2013.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.