Blind Buying: Hey… It works in the world of fragrance!

Sometimes, as Jim Cramer stated on his daily CNBC show, you have to close your eyes and buy.

 

If you are a religious “Mad Money” viewer, you may point out that Cramer offered this advice quite a while back in a bull market. He was implying that even though everything was overvalued, investors should still ‘get their bull on’. Stocks were moving higher, and to miss out on the potential gains for the sake of rational thinking would be…well, quite irrational.

 

This is essentially the strategy we have employed for the last eleven months (though due more to inexperience and club guidelines than to any type of allocation strategy). If the Dow drops 100 or comes up 70, we buy every month… like clockwork. No sales, no short sales, certainly no Iron Condor option spreads. I don’t know if Mike closes his eyes when he clicks buy on our TradeKing page, but for argument’s sake let’s imagine he does.

 

Cramer could rationally offer the same advice in this market, as he could in the market a year ago. Conventional wisdom tells us that: if you will live to see the profits from blind investment during a period of uncertainty, you won’t regret your decision (as long as you diversify). Looking at historic returns, if we keep working our current strategy, we won’t regret putting our money in for the long term. No two decade period has lost investors money (in net), not even periods that included ’29, the great depression and WWII.

 

Are there losses to be saved by holding off on our blind buy strategy during this downturn? Maybe. A good argument could be made for holding off… especially during our safe spot months. If your name is VTI and your job is to track the S&P, for the foreseeable future, providing the same mediocre returns as the market as a whole isn’t exactly outside of your job description. At least through the end of the year, a better safe spot could be found at our local mattress retailer.

When it comes to individual companies, however, I think we have some faith on our research. If market conditions prevent decent returns with our current strategy, we wouldn’t have sizable (though unrealized) gains through companies like V and FRO on our books.

 

Rather than attempting to time the moment when the market bottoms out, which it may already have, I think our focus should be on finding more winners. Wall Street analysts are suggesting that pharmaceuticals (as a whole sector) should perform well in the near future. Perhaps we should try that sector again, maybe in lieu of the next scheduled time when we flush our money down the S&P toilet.

 

Let me know what you think…