Volatility Will Make You Rich If You Know This
Volatility Will Make You Rich If You Know This
2022 was not such a bad year
Many people tend to think they know what the new Apple or the new Amazon will be. A company that they buy now and compound at a rate of 30-40% over the next 30 years. To that end, they do their investment thesis. I'm sure you've read or heard a lot of analysis similar to:
"This company has had 100% YoY growth."
"Telecommuting is the future; therefore, this company will succeed."
"The barriers to entry for this company are enormous".
Look, I will give you a vulgar opinion that your brother-in-law could provide: "This is playing the lottery".
Obviously, if you concentrate and get it right, you will be the next Warren Buffet, but there is only one Warren, and the main problem is that many people have tried and fallen by the wayside. All of them, to this day, is unknown. If you pick stocks individually, you have a 99% chance of being the next. This number increases if you think you are smarter than average.
How many are there who bought shares of Lehman Brothers and lost almost all their money or bought shares of Burford Capital and found out it was a scam.
We know our capabilities, which are already one step ahead of 99% of investors. That's why we always recommend indexes over stocks.
Betting on insurance
What we are going to reveal to you today is a safe bet. It's like if we tell you, "we've gone into the future, and we know what the next Apple is"“ ”
And how do you know that? Very simply, by betting on volatility. Volatility will come back sooner or later. When will it return? We don't know, but we know it will come back.
One of the most interesting metrics we know is that the VIX every 3.5 years goes to 40.
When it gets to this level, you can benefit from buying CALL options. You will benefit more when more OTMs are in place, or tell that to the CAR guys when they hit this home run.
Buying very OTM options when they are cheap is a safe option in the case of volatility because we know that sooner or later they will reach a high point (>40).
What happened in 2022?
2022 has been a horrible year for the markets. All types of assets have performed poorly, from stocks to bonds, from gold to cryptocurrencies.
If we had to say a winner, it would be the dollar, and if we had to say a loser, it would be long-term bonds.
But there is a hidden asset that very few people talk about volatility. This year, volatility has behaved with ups and downs, but it has never touched 40.
We bought when it was at low points and sold (partially) at "high" points.
This has given us a positive return of $8k with a "relatively" small portfolio.
What does the future hold?
It is clear to us that sooner or later, volatility will return to the markets, and it is clear to us that we will take advantage of it.
As you know, we have a portfolio exposed to black swans, and we know that every 3.5 years, one will come to volatility. In fact, without one coming, we have been able to make money (and will continue to do so).
Now our portfolio with a fiscal tip.