1. Abandon the popular averages: Over the past six years, all major averages are grossly negative or just starting to get back to their best past levels. At the same time, the NYSE advance / decline line has been very positive. Moreover, the last time the averages were, issue breadth was completely negative.
2. And the basic principles of investing, again, are what? Most investors confuse quality with the expectations of analysts and think Diversification means you have one of each type of product that is out there. In fact, they are simple risk mitigation tools that every investor needs to use.
3. Appreciate the power of income: Basic Income should just grow every year, period, for a person to keep up with inflation only hope. That's right, growing Market Value is inflationary ... especially with regard to hat size, and income paves the road to retirement income.
4. Buy low (within reason), sell higher: Profitable company stock prices fluctuate as unprofitable ones. The difference is that the former are much more likely to go up again. Buy quality at lower prices (just like any other form of shopping), big BUT, set a reasonable (10% or so) profit-taking target ... and pull the trigger. Re-load, and do it again.
5. Embrace The Working Capital Model: For both portfolio Asset Allocation and Performance Evaluation, use the base cost of your businesses, as opposed to market value. This is the only way to short periods (one year is the shortest for anything meaningful) to use for any kind of analysis. Also, as a bonus, you'll never be another fixed income mistake.
6. Volatility in love, not with the effects of any kind: Volatility in the market is one of the few things (if any at all) that you can be sure about. Use it wisely and it will shorten the investment success your way. All too often, unrealized gains become realized losses on the return. The beloved
7. Remember Peak-to-Peak and Trough-to-Trough: There was a time that tests like these (and variations like P to T or T to P) where the sole valid (Market Value) testing the ability of a manager. They still are. I have never found a correlation between the calendar year and any market, interest rate or business cycle.
8. Corrections are as lovable as rallies: In truth, profit taking is more fun, and much easier decision than buying stocks, while in the throes of a falling stock market. But it is just the reverse of the other, and you need to learn the lyrics every day, just as you knew Peggy Sue.
9. Understand The Investor's Creed: How did the business get a bad rep? What is a scholarship? Buy and hold just does not fit. The key is timing (not market timing) and selectivity. In a rising market, you need more than buying to sell, resulting in a growing cash position. This is a good thing. In a declining market, you need more than selling, resulting in a smaller cash to buy ... also a good thing. If you run out of money while the market is still down, you do it right. If you feel stupid taken in the same way, after your profits and the market is still foaming, your brilliance is not your only reward.
10. Investing is not a competitive event: It's all about you: your money, your risk tolerance, your goals and your goals. It does not matter what the others are doing, why and how. Think about this. There is no average, index or benchmark that can be changes with the Market Value of a well-diversified portfolio compared. Nadda.
11. Regulating and Apply Discipline ... a bonus idea. Just do it.
, "The Brainwashing of the American Investor: The Book that Wall Street does not want you to read"
No comments:
Post a Comment