I’m not a stock picker. To give you an idea, over the last six or seven years my major trend following strategy here in Australia that trades long only equities, my win rate is about 49.6%. During that time, my compounded annualized return is about 18% compared to the market 2.7%. That’s only getting it right 50% of the time.
I don’t pick stocks, they pick me. Because they float to the top. I don’t have to pick the next best sector. I don’t have to time when the market is going to be good or when it’s going to be bad. I just have to be there when the time comes along. I think that’s a very good lesson, especially when you’re trading equities, especially on the long side. You can’t afford not to be involved during the good times.
To give you an idea, if you had stepped aside in the nine month period following March 2009, if you had said “It’s all too hard!” in early 2009 and stepped aside for nine months, your annualized return goes from 8.5% down to less than 1%. Just because you missed that nine month period of time where the market jumped 30-35%. That’s what happens when you get scared at the bottom and don’t participate. A lot of people did not participate in 2009 and are still too scared to participate in the market, and that is because they have got no way to get out when things turn sour again.