One could hardly be blamed for looking at the market these days and feeling a little bit uneasy about how to invest. Supply chains are strained, inflation is running near 40-year highs, and global geopolitical tensions are boiling over – particularly in the ongoing war between Russia and Ukraine.
The tech sector, my wheelhouse, had performed so strongly since the March 2020 lows, outperforming even the S&P 500, but now it appears to faltering – it seems all the talking heads are pointing this out.
But it’s absolutely critical to keep perspective here: Tech is still driving the global economy in the 21st century, and the NASDAQ Composite is still nearly double where it was in March 2020.
What’s more, the biggest, most powerful mega-caps in tech – the FAANGS – while certainly lower, aren’t the companies leading the way down. Rather, it’s the smaller tech firms contributing to this volatility; they don’t have the wherewithal to absorb inflation-driven costs the way, say, Microsoft Corp. (MSFT) can.
In my view, based on my experience, we can count on tech’s strong bull run to eventually resume and, quite likely, hit even higher highs. That’s the long-term picture.
In the here and now, however, there’s no need to head for the hills and leave all the profit and potential on the table. Instead, we can take just three easy, time-tested steps to protect our gains, find new opportunities, and keep our powder good and dry for the next leg of a century-long tech bull market.
Here’s how to execute…
Today, I want to share with you my three favorite tools for doing just that…
Simply stated, the “Cowboy Split” is a staggered-entry system that works particularly well for quality tech stocks.
You take a position in a stock at market – and then enter a “lowball limit” order to buy more if a discount comes your way. In general, I recommend employing a 15% to 20% discount from your entry price as a second buy point. Here’s how it works…
You acquire 50% of your intended stake of XYZ Tech Corp. at a price of $50. In this case, should the market trigger your “lowball limit” order, you would automatically buy a second 50% stake at $40 a share for an average price of $45.
Now assume XYZ rallies all the way to $60. You would then have a 16.6% appreciation on your original shares. But it’s that second stake that really juices your profits.
See, that second half’s gains are double those of your first buy. This way, you end up with overall gains of 25%, or roughly 50% more than had you just bought your full stake at $50.
Tech-Profit Protector No. 2: The “Free Trade”
Whenever a stock doubles in value, take a “Free Trade” and lock in gains. That’s a sell order for half of your stake. Doing so means you have all your original capital back and are then playing with the “house” money.
It’s a powerful way to protect profits against a volatile market with two side benefits. First, you can end up owning a suite of stocks essentially for free. And second, you stay in the position to reap any new upside, which is critical when you take the long view, and you’re expecting a bull run to resume.
But this tool becomes even more effective at securing profits when you combine it with my third and final choppy market tool. By using both of them together, you can effectively guarantee massive profits against sudden market moves.
Tech-Profit Protector No. 3: The “Autopilot Profit System”
Whenever possible, set yourself up so that you exit a position with specific gains no matter what happens.
That’s where the “Autopilot Profit System” comes in handy. It’s a unique way of protecting profits with a combination of taking gains and using trailing stops.
It’s a great way to take some money off the table if you want to protect gains before a free trade would kick in. The tool works like this…
Let’s say you sold a portion of XYZ Tech when it was up 30%. Now, you can afford to see if the stock still has more upside while at the same time protecting your profits against any reversal.
In this case, you could set your stop at your original entry point and walk away with combined gains of 15%. Or you can set the trailing stop above your entry price to lock in more money.
The beauty of the system is that you set up your minimum profit figure in advance. After that, there’s no need to worry about what happens because the Autopilot System is protecting your hard-won gains.
Like I mentioned above, this technique pairs excellently with the free trade. You can set a 50% trailing stop on the second half so that you walk away with combined gains of 75% no matter what happens.
You can see that by using our Tech-Profit Protectors, you can keep on investing in winning tech stocks – even in this rocky market – and know that we’re prepared for anything the world throws at us.
Now, these are the basic tools, but I also have specific companies in mind when it comes to how best to play this moment in the market, and I’m ready to share them with you. In particular, I’m thinking of two stocks I think are perfectly positioned to help crack open the multitrillion-dollar Metaverse. You can learn about those right here.
Cheers and good investing,