When the Well Opens, Bring Buckets

Some days I think I might just be king of idiotic analogies. But hey, so long as they still work to get the point across—why not just go with them?

If you have followed me at all, of course for some time I have said that I was making some major shifts to my stock positioning, and I was doing it because I felt like a change was coming.

You can never time these things and nothing is ever certain of course. But if you have been doing something like the stock market for long enough, as I have been, you just sort of get a really good gut understanding of how things generally will go and what things lead them to go one way or another.

As such I began shifting from stocks to cash, changing my allocations to 58% cash, 40% stocks and 2% crypto. Prior to the shift I was at roughly 72% stocks.

But the reason I did this was two fold. For one, I was in a position to change some of my positions anyway. You know, sometimes you feel one sector over another is better and so you get out of one and switch to another. Sometimes a peer company seems to have a better future prospect than the one you picked before and you think, well, time to go that direction.

I had also made a massive amount of profits from the major bull run that has been the case with the stock market going on for several years now.

As much as I like to stay invested in solid companies, I do have a side of me that likes preservation of capital as well. And so, taking profits is simply a matter of that. I can sell off my shares, enjoy my profits, protect those profits from any short term market changes, reinvest back in almost immediately in smaller chunks and build my positions back up.

So, to me taking profits from time to time just makes sense.

But it serves another purpose as well. Shifting allocations and profit taking, that is. It prepares buckets.

One thing I talk about often as well is not missing out on an opportunity because you can't take advantage of them when they come. You simply have to always make sure you have money sitting on the sidelines so that when there is a change you can invest in those good, solid companies that will take a beating along with the rest of the bunch, but that will still fare well when the markets return to norms.

By the way, this does not go against my overall thinking that the best time to buy the stock market is forever and always, no matter what direction it is going today, because ultimately the only direction is up.

It just means that if you have enough money on the sidelines you can buy many more shares when the markets dip.

Again, buckets.

Think of it this way. You get word that an oil well has just popped somewhere nearby. Who's going to get the oil? Why, the people with buckets they can fill of course. And who's going to enjoy the most oil? The ones who have the most buckets to fill.

If you hear the well has popped and you don't have any buckets, you won't get any oil. You will simply know that the well popped and others got at it while you had to sit back wishing you had the buckets you needed to get a fill of it.

The stock market today entered bear market territory, which is called when the markets lose at least 20% of its value over a given period. We did that. So, a bear market is essentially here.

As bear markets go there's going to be a bit of back and forth, but likely we will see more short term downside before we see any upside.

The allocation changes I made to return 58% to cash gave me buckets and the entrance into the bear market was the oil well popping. The short and skinny is that I have plenty of buckets to fill which will give me greater advantage when we return to a bull market to profit more heavily and see more upside to my entire portfolio when all is said and done.

I have not decided to make any major short term allocation changes. In this I think it is better to do things a bit more slowly and to be quite calculated in my approach. For example, I may reduce my cash position by 2% in the short term. A month from now I may decide to reduce my cash by another 2%.

Process repeat until you are back at your old allocations and then evaluate new profits and act accordingly.

The bottom line here is that part of making the most money is a matter of keeping your buckets available so that when wells open up you have the ability to reap the rewards. Not be left wishing you had buckets.

Lead image courtesy of Pixabay, user eyeonicimages. Oil Derrick Rig - Free photo on Pixabay