[yreg]

The strategy forces you to time the market. You might get unlucky by holding cash during a market rally, then buy back for a dump.

An investor who sells when they think the market is going to go downhill, with the intention to buy back later is not acting as an investor but as a trader.

That's why hedging with options is less risky (and less profitable in the best case).

edit: My use of word 'unlimited' applies if you want to keep the same stake at the companies. In money terms you cannot lose more than the value of your holdings.

[metafunctor]

Yep, then I agree. I'm not advocating for trying to time the market, or holding cash instead of being on the market.

But selling your position simply does NOT mean you take on "unlimited loss potential". It's simply being outside of the market, which means you're missing out on gains. It's not like selling stock is suddenly the same as shorting the same stock. I think the terminology here is clear-cut and well established.

[caffeine]

I get what you're saying and I think your terminology makes sense.

But the way to understand this is to reframe your view of "money" from being some special, neutral thing to just being another asset.

At any given moment, you could own $1000, or some gold, or some bitcoin, or whatever else. There is nothing special about the fact that it's $ you're holding rather than DOGE or SPY.

So imagine a 2-asset world, that has SPY and $ in it. You are holding $1000 right now, and the market goes from 1 SPY = $1 to 1 SPY = $1000. That is a loss. Denominated in SPY, you just lost 999 SPY.