My investment methodology is quite simple:
(1) Uncover well managed, undervalued (well priced),
publicly traded company stocks to buy, and
(2) Don’t lose money!
# 1 above is quite easy.
Finding good companies to invest in, during a bull market – as we have
enjoyed over the past couple of years – is relatively simple.
Most blue-chip stocks showed good gains. For example, scanning the Dow (the index of 30
large stocks known as the Dow Jones), one will easily notice that as of today,
the index has returned +17% YTD. In
theory then, one could have simply invested in this index of 30 quality
equities, for a solid return of 17% booked this year.
Simple?
I sincerely hope that your mutual fund investments (in your
401k) outperformed the Dow?!
Managing # 2 above – not losing money – may prove a little trickier, especially when the politicians decide to wield
extraordinary, unpredictable influence on market returns. Let’s face it, some of our elected leaders
can’t even read, speak or write their first language fluently, and yet we have
to rely on them for economic reform and policy, and fiscal management!
Many of my previous posts cover technology tools, like
trailing stops (a personal favorite), stop loss orders, managing emotion,
controlling greed, etc. However, I am very
confident that any technology available to help you control investor emotion –
and therefore the risk of investment loss – would be a good thing!
DO NOT rely entirely (or only) on a financial advisor to
protect your assets and/or gains. This simply
isn’t a fair or reasonable expectation. You’re
likely just one of many clients that he/she has to manage; your investment
account balance is probably more important to you than what it is to them; and
they have already asked you to sign an agreement to acknowledge and agree that all investments carry
the risk of loss… meaning that it’s not their fault if they lose your money!
I trade often; buying frequently, selling occasionally. My typical cap on investment losses is pegged
at 3%, but during high volatility – like a government shutdown and debt ceiling
debate – I may move to 5% or greater.
I took some hits commensurate with my sell orders on $ABBV,
$BA, $CRM and $V. Although I lost money
on these four positions, they’re all good stocks, and I’ll buy them back in a
dip… once the respective wash sale periods (30 days) have lapsed.
However, other long positions in my trading account are all
in the money. And I can’t lose because my
gains exceed my stop-loss prices (i.e. the prices that they would sell for – if
they do – are all greater than my respective purchase prices).
Simply put, by way of an example… if I am now up 5% on $BLK
and have a 3% stop-loss sell order plugged in; I will generate a 2% gain if I
were e.g. to sell tomorrow. Not bad for
a 5-day position! Are you making 1-2%
every single trading week?
Other longs include $ACN, $AMTD, $BP, $C, $CLB, $FB, $GE,
$HD, $PFE, $QCOM and $WFC.
By combining methodology numbers 1 & 2 above, I try to
achieve a 1% return every trading day.
That’s my target. It’s a very lofty
goal, causing me to fall short every year by a long way… However, I manage to outperform a typical mutual
fund manager easily on annual returns/gains booked.
You can too, it’s not rocket science. An hour a day may be too much, just check in regularly!
Disclosure: all positions as described above
