Do you act like an amateur trader… or do you act like a consistently profitable professional trader?
The amateur trader spends 100% of his time considering what to buy… He spends 100% of his time thinking about “reward.”
The experienced professional considers “reward,” too… But he spends even more time considering what NOT to buy. He spends a lot of time thinking about risk.
(For a trading legend’s take on this concept, read our summary of Paul Tudor Jones’ attitude on “defense, defense, defense.”)
You can see exactly what we mean in today’s chart…
The big “clean energy” fund (PBW) is an easy, “one click” way to go long solar, wind, and various other clean energy companies.
As we’ve shown readers of our sister site DailyWealth several times over the years, PBW investors face a big problem: Most clean energy companies are based on such terrible business ideas that you could say they are “perfectly hedged.” They lose money in both good and bad economic times. Their share prices are able to sink in both bull and bear markets.
Contrast that with another fund we’ve been keeping tabs on in DailyWealth: the big utility fund (XLU). This fund holds companies that own nuclear, coal, and natural gas power plants.
Cities and states often limit utilities’ ability to raise prices. In exchange, utilities enjoy monopoly positions in their markets… and guaranteed profits. The government-guaranteed profit turns these companies into income machines. That stable, safe income has helped utility stocks enjoy a “slow and steady” uptrend, despite wild moves in the broad market.
So today’s chart compares the performances of PBW (red line) and XLU (blue line) over the last 18 months, a period where the market has been mostly flat.
As you can see, PBW has more than 60%… and lost hundreds of millions of dollars of investor money. XLU is up nearly 25%… and is paying out steady dividends to its shareholders.
Whatever your politics… whatever your thoughts about how the country should generate power… as a trader, you’ve got to let the market serve as the judge, jury, and executioner of any idea.
Right now, the market is agreeing with our idea that dividend-paying utility stocks are a great way to make safe money. And it’s saying clean energy is one idea NOT to buy.
Amber Lee Mason and Brian Hunt
Source: The Growth Stock Wire