Posts filed under “Apprenticed Investor”
click for larger chart
Chart courtesy of FusionIQ, Bloomberg
I wanted to follow up a post from last year about EWJ. Back in December ’10, I mentioned 10 Reasons I Am Thinking About Japan. Regardless of your views going forward, if you owned or traded this, you should have had a plan in place, and executed your strategy on it.
I wrote than “Note how many times EWJ got turned back at $11. What would get me really excited was a high volume breakout over $10.90-11.”
EWJ did manage to get over $11, kissing $11.60 — but on rather mediocre volume. If you were thinking about a big position, the lack of volume should have kept you small (or out altogether).
Regardless, you should have followed your discipline. It could have included such rules as:
• Buy the stock on a high volume breakout over $11 (1st chart here)
• Sell the stock when the uptrend is decisively broken (Red circle)
• Buy the stock when it falls back to support at $9 -9.50 (Green circle)
You will never know when an event(s) such as an Earthquake/Tsunami/Nuclear accident will occur, but you certainly can have a trading plan in place way before hand. Having a plan, and having the discipline to execute that plan is crucial to success as an investor or trader . . . .
“The Investment Answer” is broken down into five main principles:
1. Hire a fee-only, independent financial advisor, not a broker who is compensated for selling you company products. This is an issue both Goldie and Murray felt strongly about. “[Murray] didn’t care for the retail side of Wall Street; he felt that was the side of Wall Street that was really hurting people,” Goldie says. “This book was his attempt to try to educate people and help level the playing field.”
2. Diversify among stocks and bonds, buying both large and small caps and value and growth.
3. Divide foreign and domestic investments.
4. Decide if you want to own passive or actively managed mutual funds. Goldie and Murray both encourage passive investing. “Over time a passive strategy on average will outperform an active strategy,” says Goldie. This concept was hard, even for Goldie, to understand at first. “I was brought up under the idea that if you worked harder and you were smarter and better, you would perform better. But it doesn’t hold with investing.”
5. Rebalance your portfolio.
> Why politics and investing don’t mix Washington Post Sunday, February 6, 2011; G06 Barry Ritholtz > Washington, I’m here to tell you, politics and investing don’t mix. Yep, I thought I’d begin our conversation about investing by rocking your most cherished beliefs. Many of you are active in party politics, work for government or…Read More
> I had a column published in Sunday’s Washington Post Business Section. Its titled “Why politics and investing don’t mix.” Here is an excerpt: “I thought I’d begin our conversation about investing by rocking your most cherished beliefs. Many of you are active in party politics, work for government or are involved in related fields….Read More
January is halfway over, so it is once again time to look at the various errors, mistakes and wrong headedness that I succumbed to (damn human!) working in the asset management business in 2010. My mea culpas for 2009 can be found here. Assessing the performance figures in 2010, there were plenty of things to…Read More
Yes, its that time of year when all the Gurus come out to discuss what the markets and the economy will be doing in the coming 12 months. These tend to fall into several categories: 1) Asset managers talking their books; 2) the Perma-bulls and bears do the usual debate; 3) A series of confirmation-biased…Read More
Raymond James’ P. Arthur Huprich published a terrific list of rules at year’s end. Other than commandment #1, they are in no particular order: • Commandment #1: “Thou Shall Not Trade Against the Trend.” • Portfolios heavy with underperforming stocks rarely outperform the stock market! • There is nothing new on Wall Street. There can’t…Read More
In trying to make sense of the world around us, our brains have evolved to do some very odd things. The more we learn about our cognitive processes, the more it seems we have inherited a very weird wetware set, filled with bizarre and misleading foibles. While most of the cognitive errors I reference here…Read More
Chart via No Brainer Trades > No Brainer Trades brought the above chart to my attention, and its worth spending some time detailing. “I heard this guy on CNBC . . . well, his opinion is . . . his trades are . . .” As the chart suggests, these turn out to be amongst…Read More
“You still have an investment culture that’s still too heavily steeped in the most recent experience rather than rationally basing it on the evidence of the day. We had such a terrible crisis of ‘08,’ it’s not surprising to me that the first slowdown of the recovery brought back deflation-depression mentalities with vengeance.” -James Paulsen,…Read More