Educational Guide: How to Leverage Intermediate-Term Investing into your Skillset
New Educational Guide Released
Hi Everyone - as we progress through 2024 - I will be writing more educational guides for members that have evergreen value. With more skills, we put ourselves in a better position to find opportunities in different environments. More education achieves this larger purpose.
As I create a larger library of content, our Community will increasingly have a course/educational feel on top of actionable ideas to find alpha. Make sure to join before prices go up later this year as our content library grows with each educational publication and DCF Conclusion Study (which long-time readers know are VERY powerful for finding entries for stocks). Members are grandfathered in when they join. Annual saves the most.
In this guide, I’m going to talk about Intermediate-Term Investing. Some in our industry call this timeframe Swing Trading.
Previously I discussed Intraday scalping. That is done purely on a daily timeframe. The purpose of scalping is to achieve positive cash flow and simply “be green”. Goal is not to beat the market, but to “get a piece” out of what the market can offer you. A profession can be made out of scalping. I treat it as a supplemental strategy on top of intermediate/long-term investing.
Each timeframe, in my opinion, is almost like a separate line of business in an All-Weather Wealth Building Strategy in markets. They serve different purposes, and used together, they produce diversification benefits.
Intraday: Get a piece out of daily action. Has most value when you are uncertain about future direction but can react appropriately to well studied Daily levels. Technical analysis is very important. Fundamental and macro analysis is important background knowledge.
Intermediate-Term Investing: This timeframe requires having a forecast of what markets are likely to do in the coming weeks & months. Fundamental analysis is very important. Macro analysis is important but secondary to fundamental analysis.
Long-Term Investing: The most important criteria to success here is Time. The more Time that is spent in the position (assuming a good company/ETF), the higher the success rate. There is no variable that is more important than Time in LT Investing. Long-term investing is more passive, stress-free, and suitable for people who want to let compounding do its thing.
Intermediate-Term Investing is the middle-ground between Intraday Trading and Long-Term investing. Here are the characteristics behind it:
Unless focusing on the Index, the focus is on the Individual Company and its prospects. This timeframe focuses on Fundamental Analysis, Earnings, and Profitability.
The most valuable tool in Intermediate-Term (and LT) Investing is the DCF Model (in my opinion).
Macro considerations such as FOMC, Inflation, Interest Rates are important but secondary unless we enter a period of extreme high correlation in all assets.
You treat the position as an Investment. But if returns come very quickly or sooner than expected, you do not have an issue turning it into a Trade and taking profits. For example, if our target on FIVE is 190 in 6 months and the stock went from 175 to 185 tomorrow, we should recognize that our target has been nearly attained.
The holding period can be anywhere from a few days to 6 months.
You are indirectly looking for Sector Rotation to come into favor for the area where you are placing capital. Sector Rotation is also an intermediate-term concept.
Intermediate-Term Investing can also leverage the use of Options, which I will discuss below. There is a very specific type of Expiration and Strike that I’ll talk about that relates to this timeframe.
As a fun example, just today (4/4) I shared an intermediate-term idea actually to friends in my Community.
And while I give intermediate-term ideas time to work out, I try my best to leverage my intraday scalping skillset to get Members into companies with entries I think are favorable. Disclaimer: I can only do my best. Markets can be fickle/uncertain/weird.
Below, I will share my Big Picture process for how I go about intermediate-term investing. This is going to be PACKED with value, so I really do encourage readers who have wanted to learn about Options to join our Community to learn new skills.
This information below enters the realm of execution and will be shared with members-only: