Why Having Skin in the Game Matters More Than Market Returns

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Here’s the dirty truth: Most things that people proclaim as being predictive for investing ultimately have no predictive power at all. It’s not an opinion. I’ve back-tested thousands (literally) of strategies and signals, and most don’t work, independent of the opportunity set they are expressed on.

What’s worse to me than people who falsely proclaim that something is predictive is those who say they are “professional traders” but don’t show their audited portfolio performance. They don’t talk about their position sizing and exact entry and exit points in a way that investors can verify. They have no skin in the game.

Say what you will about the many things I got wrong this year, but at least I put my money where my mouth is. I am an entrepreneur managing strategies, not just someone who comments on markets. I have published five different research papers that are back-tested and cover intermarket dynamics that do have predictive power.

So why is it that the investment community rewards people who have no transparency? Why is that we gravitate toward the soothsayer on the hill without verifying results?

We should value transparency and skin in the game more than opinions that confirm our views. How else can you possibly know if theinvestment researchyou read matters?

Like everyone, I’m right and wrong a lot about the unknowable tomorrow. But my conviction and my tone in my writings and social media posts come from a place of knowledge and respect for cycles.

To that end, it’s been an incredible year for bulls in large-cap stocks, saved entirely by the November to December highs in both stocks and bonds. The pre-election year script held. The 1987 analogy didn’t. The concerns about a corporate credit event I expressed didn’t come to pass.

The Bottom Line

That’s okay. I know that investing and trading go beyond the small sample of the here and now. And that the only way to perform is to test market dynamics and signals across multiple decades. You only do that when you have something to lose. Not followers, but assets. Not reputation for getting it “wrong,” but time.

It’s hard to find people to follow who have not just credentials, but real risk on the line. Focus on finding those that do whether they are right or wrong. At least they take the risk while others take the likes and reposts.

On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing. Michael A. Gayed is the Publisher of The Lead-Lag Report, and Portfolio Manager at Tidal Financial Group, an investment management company specializing in ETF-focused research, investment strategies and services designed for financial advisors, RIAs, family offices and investment managers. InvestorPlace readers that are new subscribers to the The Lead-Lag Report can receive a 30% discount.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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