Bull by Night, Bear by Day Is Best Strategy, Goldman Sachs Says By Alexis Xydias
March 12 (Bloomberg) -- Investors should take advantage of others’ “fear†of the night, according to a study by Goldman Sachs Group Inc. that shows holding U.S. stocks overnight since 1993 would have quadrupled an investment.
Buying futures on the Standard & Poor’s 500 Index, or a fund that replicates the benchmark for U.S. equities, just as the trading session ends and selling them when the market opens the next day has yielded 309 percent since 1993, New York-based analyst Peter Berezin wrote in a report sent to clients today. The inverse strategy lost 58 percent.
Investors and traders may have become more reluctant to hold securities overnight, when they’re unable to react to market declines abroad, Berezin wrote. The S&P 500 has plummeted 54 percent since reaching a record in October 2007 as the crisis in credit markets and the collapse of banks including Lehman Brothers Holdings Inc. hammered equities, while the Chicago Board Options Exchange Volatility Index, the so-called gauge of fear, has more than doubled.
“A large number of market participants are averse to holding overnight positions, which causes them to sell at the close (thereby depressing intraday returns) and buy at the open (thereby inflating overnight returns),†Berezin wrote. “Such aversion to overnight risk is likely to be higher during bear markets.â€
Overnight Spread
The difference between market-close and market-open prices has widened to 9 basis points since October 2008, the study said, from a “long-term†average of 5 basis points. A basis point is 0.01 percentage point.
The best way to benefit is to hold the S&P 500 at night, while short-selling it during the day, Berezin wrote. The strategy would have returned 507 percent in the period, the analyst said, while acknowledging the increased costs of such a trading-intensive strategy. Short-sellers sell borrowed securities on expectations they will be able to repurchase them at a cheaper price before their loan is due.
The S&P 500 reached 666.79 on March 6, the lowest intraday level in more than 12 years. The benchmark index for American equities has fallen 20 percent this year.
“Even when one is pondering less trading intensive strategies, the analysis above suggests that there is a cost to be paid for avoiding overnight risk,†Berezin wrote.
|
|
Investment Strategies 01 (Nov 08 - May 10)
Re: Investment Strategies
by winston » Fri Mar 13, 2009 3:38 pm
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies
by winston » Mon Mar 23, 2009 5:37 pm
Forbes’ 10 Biggest Losers: 4 Wealth Protection Lessons From Bankrupt Billionaires
by Louis Basenese
Last week, Forbes magazine released its annual list of billionaires. No surprise, the rolls shrank.
“[In 2007], there were 1,125 billionaires. This year, it’s down to 793,†says CEO Steve Forbes.
An NPR broadcast tried to put an optimistic spin on the news suggesting, “All those empty spots… mean more room for the rest of us to move up.†In good fun, it even provided five secrets to do so, based upon the business activities that propelled 38 new billionaires into this year’s rankings.
But in all fairness, I don’t think a single one of us stands a chance of becoming a billionaire in the next year. So let’s put the Forbes list to better use than invoking a fanciful daydream about joining the lifestyles of the rich and famous.
Turns out, by focusing on the 10 biggest losers - who lost a combined $238 billion - the list contains four timeless investing lessons we can put to work immediately to prevent a similar disaster (in relative terms, of course).
Lesson #1: Have an Exit Strategy
While some can argue averaging down - buying more shares as prices fall to reduce your average cost per share - is a smart move, it’s stupid if you don’t ever stop. Just ask Carlos Slim Helu. To his detriment, he couldn’t resist buying more of luxury retailer Saks or The New York Times as shares plummeted.
Instead of endlessly throwing good money after bad, cut your losses and move on. It’s hard to do, that’s why we recommend using trailing stops. They take all the emotion out of the decision and provide much needed discipline to exit an investment gone bad… before it gets really bad.
Lesson #2: Don’t Try to Time the Market or Make a Few Big Bets
We know it’s tempting. But even Warren Buffett can’t do it. He admittedly “did some dumb things.†Atop the list is certainly his decision to plunk down $244 million on ConocoPhillips at the top of the oil market. Trying to make a fortune by placing a few big, well-timed bets is a surefire way to lose a fortune, not make one.
Lesson #3: Use Leverage Sparingly… Or Not at All
Russian oligarch Oleg Deripaska needed a $4.5 billion loan from a state-controlled bank to avoid a margin call by Western Banks on his 25% stake in Norilsk Nickel. Other margin calls forced him to raise $2 billion by selling his stakes in Magna International and Hochtief. Leverage might magnify returns on the upside, but don’t forget it does the same thing to losses on the downside. And we’re not as fortunate to have a state-controlled bank to bail us out.
Lesson #4: Asset Allocate
This is akin to our parents telling us to “eat your vegetables.†We know it’s good for us. But that doesn’t mean we necessarily do it. Consider this your annual reminder because without exception, the 10 biggest losers on the Forbes list had almost all their assets in one basket.
Take Anil Ambani for example. His sizeable investment in India’s Reliance companies (Communications, Power and Capital) made him last year’s biggest gainer and this year’s biggest loser, down $32 billion.
Granted, most billionaires can’t simply unwind their biggest investments. In many cases they’re in the business they created and they need to retain a large stake to stay in control.
But we can. So if too much of your portfolio is invested in a single investment, it’s time for a change.
If we don’t invest too much (position size) in any one opportunity and spread our investments around widely (asset allocate), it’s impossible to be wiped out in one fell swoop.
Yes, protection is that simple. And while it might not be that easy for the world’s billionaires, it is for us. So use it.
Source: Investment U
by Louis Basenese
Last week, Forbes magazine released its annual list of billionaires. No surprise, the rolls shrank.
“[In 2007], there were 1,125 billionaires. This year, it’s down to 793,†says CEO Steve Forbes.
An NPR broadcast tried to put an optimistic spin on the news suggesting, “All those empty spots… mean more room for the rest of us to move up.†In good fun, it even provided five secrets to do so, based upon the business activities that propelled 38 new billionaires into this year’s rankings.
But in all fairness, I don’t think a single one of us stands a chance of becoming a billionaire in the next year. So let’s put the Forbes list to better use than invoking a fanciful daydream about joining the lifestyles of the rich and famous.
Turns out, by focusing on the 10 biggest losers - who lost a combined $238 billion - the list contains four timeless investing lessons we can put to work immediately to prevent a similar disaster (in relative terms, of course).
Lesson #1: Have an Exit Strategy
While some can argue averaging down - buying more shares as prices fall to reduce your average cost per share - is a smart move, it’s stupid if you don’t ever stop. Just ask Carlos Slim Helu. To his detriment, he couldn’t resist buying more of luxury retailer Saks or The New York Times as shares plummeted.
Instead of endlessly throwing good money after bad, cut your losses and move on. It’s hard to do, that’s why we recommend using trailing stops. They take all the emotion out of the decision and provide much needed discipline to exit an investment gone bad… before it gets really bad.
Lesson #2: Don’t Try to Time the Market or Make a Few Big Bets
We know it’s tempting. But even Warren Buffett can’t do it. He admittedly “did some dumb things.†Atop the list is certainly his decision to plunk down $244 million on ConocoPhillips at the top of the oil market. Trying to make a fortune by placing a few big, well-timed bets is a surefire way to lose a fortune, not make one.
Lesson #3: Use Leverage Sparingly… Or Not at All
Russian oligarch Oleg Deripaska needed a $4.5 billion loan from a state-controlled bank to avoid a margin call by Western Banks on his 25% stake in Norilsk Nickel. Other margin calls forced him to raise $2 billion by selling his stakes in Magna International and Hochtief. Leverage might magnify returns on the upside, but don’t forget it does the same thing to losses on the downside. And we’re not as fortunate to have a state-controlled bank to bail us out.
Lesson #4: Asset Allocate
This is akin to our parents telling us to “eat your vegetables.†We know it’s good for us. But that doesn’t mean we necessarily do it. Consider this your annual reminder because without exception, the 10 biggest losers on the Forbes list had almost all their assets in one basket.
Take Anil Ambani for example. His sizeable investment in India’s Reliance companies (Communications, Power and Capital) made him last year’s biggest gainer and this year’s biggest loser, down $32 billion.
Granted, most billionaires can’t simply unwind their biggest investments. In many cases they’re in the business they created and they need to retain a large stake to stay in control.
But we can. So if too much of your portfolio is invested in a single investment, it’s time for a change.
If we don’t invest too much (position size) in any one opportunity and spread our investments around widely (asset allocate), it’s impossible to be wiped out in one fell swoop.
Yes, protection is that simple. And while it might not be that easy for the world’s billionaires, it is for us. So use it.
Source: Investment U
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies
by winston » Tue Apr 07, 2009 8:24 am
The Most Important Question an Investor Can Ask by Alexander Green
In this issue:
Why diversification matters
What you can do right now
Stop and ask yourself this question
As someone who has spent more than two and a half decades as a research analyst, investment advisor, portfolio manager and financial writer, I've often felt the most important question an investor or trader can ask himself is, "What if I'm wrong?"
This is done too seldom, in my experience. And that's unfortunate. Because when investment lessons are learned the hard way, it can be painful… if not devastating.
For example, when the market was flying high a couple of years ago, many investors became complacent. They blithely assumed that the market might hit a pothole here and there, but overall it would be a relatively smooth ride higher.
The long-term history of the market, of course, suggests something very different. But you didn't need to be a market historian.
All you really needed to do was stop and ask yourself, "What if I'm wrong?" Do this and the answer - the right one - generally appears. You should diversify beyond stocks and into bonds, inflation-adjusted Treasuries, certificates of deposit, or even precious metals or coins.
Doing this - which is exactly what we've been recommending for years - would not have left you entirely unscathed by the recent market meltdown. But you would be in far better shape than the many thousands of investors who still haven't summoned the courage to open their brokerage statements.
Or take individual stocks. You might have believed that you were invested in wonderful blue-chip companies that were the backbone of the world economy, giants like Citigroup, General Motors, Bear Stearns or AIG.
Indeed, for decades each of these companies bestrode their markets like a Goliath. You might recall, however, that Goliath didn't fare so well in the end. And neither did these guys.
You couldn't have known that in advance, of course. But you could have run a trailing stop behind each of your stock positions - as we've been recommending for years - protecting both your profits and your capital.
Would that have kept you from losing money? Perhaps not in every case. But using a proven sell discipline like this would certainly have kept you from riding these fallen angels into the ground.
All you had to do was ask yourself, "What if I'm wrong about the long-term viability of these companies?"
That doesn't mean, of course, that you should never have bought them. But you would have tempered your enthusiasm by using a trailing stop. That way you would have owned these stocks only as long as they were trending up - or at least treading water - and found yourself out of them when they began to seriously backslide.
This didn't require some magical foresight, by the way. What it required was humility.
It required you (or your financial advisor) to understand that no matter what the market - or any particular company - had done in the past, no one can accurately and reliably predict the future. This, in my view, is the starting point for all intelligent investing.
I was reminded of this at Investment U in St. Petersburg, FL two weeks ago, where I had the opportunity to mingle with a couple hundred investors from around the country.
Most of them were more sophisticated investors. They had been around through several market cycles. They had made a lot of money in the past. And - like the rest of us - got bruised more than a little during the recent bear market.
Talking to many of them, I sensed extreme skepticism about the outlook for the market. Some confessed that they were unremittingly bearish. I spoke with just a handful who were eagerly investing in stocks right now.
And maybe that's a good thing. Maybe after 15 months of recession, the economy is still a long way from recovery. Maybe the market will test the lows of early March or even fall substantially lower.
Maybe.
But before you sell all your stocks and stock funds, quit reinvesting your dividends, pile into low-paying cash investments or turn your back entirely on fresh opportunities in the market, stop and ask yourself the one simple question that guides and instructs all investors:
"What if I'm wrong?"
Source: Investment U
In this issue:
Why diversification matters
What you can do right now
Stop and ask yourself this question
As someone who has spent more than two and a half decades as a research analyst, investment advisor, portfolio manager and financial writer, I've often felt the most important question an investor or trader can ask himself is, "What if I'm wrong?"
This is done too seldom, in my experience. And that's unfortunate. Because when investment lessons are learned the hard way, it can be painful… if not devastating.
For example, when the market was flying high a couple of years ago, many investors became complacent. They blithely assumed that the market might hit a pothole here and there, but overall it would be a relatively smooth ride higher.
The long-term history of the market, of course, suggests something very different. But you didn't need to be a market historian.
All you really needed to do was stop and ask yourself, "What if I'm wrong?" Do this and the answer - the right one - generally appears. You should diversify beyond stocks and into bonds, inflation-adjusted Treasuries, certificates of deposit, or even precious metals or coins.
Doing this - which is exactly what we've been recommending for years - would not have left you entirely unscathed by the recent market meltdown. But you would be in far better shape than the many thousands of investors who still haven't summoned the courage to open their brokerage statements.
Or take individual stocks. You might have believed that you were invested in wonderful blue-chip companies that were the backbone of the world economy, giants like Citigroup, General Motors, Bear Stearns or AIG.
Indeed, for decades each of these companies bestrode their markets like a Goliath. You might recall, however, that Goliath didn't fare so well in the end. And neither did these guys.
You couldn't have known that in advance, of course. But you could have run a trailing stop behind each of your stock positions - as we've been recommending for years - protecting both your profits and your capital.
Would that have kept you from losing money? Perhaps not in every case. But using a proven sell discipline like this would certainly have kept you from riding these fallen angels into the ground.
All you had to do was ask yourself, "What if I'm wrong about the long-term viability of these companies?"
That doesn't mean, of course, that you should never have bought them. But you would have tempered your enthusiasm by using a trailing stop. That way you would have owned these stocks only as long as they were trending up - or at least treading water - and found yourself out of them when they began to seriously backslide.
This didn't require some magical foresight, by the way. What it required was humility.
It required you (or your financial advisor) to understand that no matter what the market - or any particular company - had done in the past, no one can accurately and reliably predict the future. This, in my view, is the starting point for all intelligent investing.
I was reminded of this at Investment U in St. Petersburg, FL two weeks ago, where I had the opportunity to mingle with a couple hundred investors from around the country.
Most of them were more sophisticated investors. They had been around through several market cycles. They had made a lot of money in the past. And - like the rest of us - got bruised more than a little during the recent bear market.
Talking to many of them, I sensed extreme skepticism about the outlook for the market. Some confessed that they were unremittingly bearish. I spoke with just a handful who were eagerly investing in stocks right now.
And maybe that's a good thing. Maybe after 15 months of recession, the economy is still a long way from recovery. Maybe the market will test the lows of early March or even fall substantially lower.
Maybe.
But before you sell all your stocks and stock funds, quit reinvesting your dividends, pile into low-paying cash investments or turn your back entirely on fresh opportunities in the market, stop and ask yourself the one simple question that guides and instructs all investors:
"What if I'm wrong?"
Source: Investment U
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies
by HengHeng » Tue Apr 07, 2009 11:56 am
That question about asking what if i'm wrong ... i always ask myself .. until the point that i realised .. something in order to be right ..sometimes you have to assume that the general public is wrong .. of cos sometimes might backfire but what i meant is extreme ends .. like for instance even the coffeeshop uncle can recommend u what stock to buy...
of coz i'm not saying that i'm always correct but i personally find this more useful than asking what if you are wrong .. (this is a pre-requirement) but assuming you are able to indentify that what if the general public is wrong i think it would do no harm ..
of coz i'm not saying that i'm always correct but i personally find this more useful than asking what if you are wrong .. (this is a pre-requirement) but assuming you are able to indentify that what if the general public is wrong i think it would do no harm ..
Beh Ki Jiu Lou , Beh lou Jiu Ki lor < Newton's law of gravity , but what don't might not come back
In the game of poker , "if you've been in the game 30mins and you don't know who the patsy is, you are the patsy
In the game of poker , "if you've been in the game 30mins and you don't know who the patsy is, you are the patsy
-
HengHeng - Permanent Loafer
- Posts: 620
- Joined: Wed May 07, 2008 2:13 pm
Qualifying good stocks from good business models
by sidney » Sun Apr 19, 2009 5:02 pm
I am quite fancinated from solid business models, which translates into good stocks pick.
For example, in US, the biz model for Apple is to using its core competencies of innovations, through differentiations to price up their apple products. And it appeals to ppl. So higher price is not an issue as evidenced by ppl holding to ipods, iphones.
In Hk (i think) Li & Fung's CC lies in the supply chain management. This is the trend globalisation requires. Assess to cheap inputs and ship back the high value added value chain to home countries for chanking and then shipping out. Based on the efficiencies of scopes and scales, and relative relationship powers for example, suppliers, they can squeeze further margins out of them.. Ability to cut internal costings and drive revenue up by command of power..
A) When i started my first stock. I buy bcos i like the way its like... gut feel.
B) Then i started reading financials based on textbks and papers.
C) Then i started to observe crisis and how to position myself. (Actually i haven yet learnt anything)
D) Then now i started to observe stocks based on biz models on what they did better relative to its industies competitors. The key is identifiying their CCs and how to identify yardsticks for measure.
As i am the mentality type of "buy and forget" (long term holdings), i can't be bothered to check SGX to regular basis. What i hope is to achieve reasonable capability in reconciling points B,C and D as a long term positioning. Do anyone had that kind of stock assessment? or is there any books based on this kind of stock pick approach available?
How do anyone qualify good stock picks based on biz models? any good example in SGX?
For example, in US, the biz model for Apple is to using its core competencies of innovations, through differentiations to price up their apple products. And it appeals to ppl. So higher price is not an issue as evidenced by ppl holding to ipods, iphones.
In Hk (i think) Li & Fung's CC lies in the supply chain management. This is the trend globalisation requires. Assess to cheap inputs and ship back the high value added value chain to home countries for chanking and then shipping out. Based on the efficiencies of scopes and scales, and relative relationship powers for example, suppliers, they can squeeze further margins out of them.. Ability to cut internal costings and drive revenue up by command of power..
A) When i started my first stock. I buy bcos i like the way its like... gut feel.
B) Then i started reading financials based on textbks and papers.
C) Then i started to observe crisis and how to position myself. (Actually i haven yet learnt anything)
D) Then now i started to observe stocks based on biz models on what they did better relative to its industies competitors. The key is identifiying their CCs and how to identify yardsticks for measure.
As i am the mentality type of "buy and forget" (long term holdings), i can't be bothered to check SGX to regular basis. What i hope is to achieve reasonable capability in reconciling points B,C and D as a long term positioning. Do anyone had that kind of stock assessment? or is there any books based on this kind of stock pick approach available?
How do anyone qualify good stock picks based on biz models? any good example in SGX?
Tempered.
-
sidney - Foreman
- Posts: 465
- Joined: Wed May 07, 2008 10:24 pm
Re: Investment Strategies
by HengHeng » Sun Apr 19, 2009 11:52 pm
Hmm good biz models dun need to borrow from the public ..
look at phillip capital ... do they need to borrow money ?
one good biz model i think would be SMRT .. for ever in the money one .. oil price high .. they jack prices .. but oil now one third the prices .. they never reduce back to the pre oil high prices ..
then they keep building shops around their mrt .. all this collect rent .. on top of the daily communers .. LOL
look at phillip capital ... do they need to borrow money ?
one good biz model i think would be SMRT .. for ever in the money one .. oil price high .. they jack prices .. but oil now one third the prices .. they never reduce back to the pre oil high prices ..
then they keep building shops around their mrt .. all this collect rent .. on top of the daily communers .. LOL
Beh Ki Jiu Lou , Beh lou Jiu Ki lor < Newton's law of gravity , but what don't might not come back
In the game of poker , "if you've been in the game 30mins and you don't know who the patsy is, you are the patsy
In the game of poker , "if you've been in the game 30mins and you don't know who the patsy is, you are the patsy
-
HengHeng - Permanent Loafer
- Posts: 620
- Joined: Wed May 07, 2008 2:13 pm
Re: Investment Strategies
by sidney » Wed Apr 22, 2009 11:11 pm
Good point. They leveage to up price.. even if ppl complain, also lan lan must take bus/train.. unless we drive
Tempered.
-
sidney - Foreman
- Posts: 465
- Joined: Wed May 07, 2008 10:24 pm
Re: Investment Strategies
by kennynah » Thu Apr 23, 2009 1:39 am
Still smrt operates within a 40km x 40km geography. I hv no interest in a sinkapore-only companies
Options Strategies & Discussions 
.(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas
..................................................................<A fool gives full vent to his anger, but a wise man keeps himself under control-Proverbs 29:11>.................................................................
.(Trading Discipline : The Science of Constantly Acting on Knowledge Consistently - kennynah).Investment Strategies & Ideas..................................................................<A fool gives full vent to his anger, but a wise man keeps himself under control-Proverbs 29:11>.................................................................-
kennynah - Lord of the Lew Lian
- Posts: 14201
- Joined: Wed May 07, 2008 2:00 am
- Location: everywhere.. and nowhere..
Re: Investment Strategies
by winston » Sun May 10, 2009 9:08 am
The Law of Investing
Posted by Brian Tracy on Nov 21, 2008
This is one of the most important of all the laws of money.
The Law of Investing - investigate before you invest. This is one of the most important of all the laws of money. You should spend at least as much time studying a particular investment as you do earning the money to put into that particular investment.
Check Every Detail
Never let yourself be rushed into parting with money. You have worked too hard to earn it and taken too long to accumulate it. Investigate every aspect of the investment well before you make any commitment. Ask for full and complete disclosure of every detail. Demand honest, accurate and adequate information on any investment of any kind. If you have any doubt or misgivings at all, you will probably be better off keeping your money in the bank or in a money market investment account than you would be speculating or taking the risk of losing it.
Money is Easy to Lose
The first corollary of the Law of Investing is: "The only thing easy about money is losing it." It is hard to make money in a competitive market but losing it is one of the easiest things you can ever do. A Japanese proverb says, "Making money is like digging with a nail, while losing money is like pouring water on the sand."
The Best Rule of All
The second corollary of this law comes from the self-made billionaire, Marvin Davis, who was asked about his rules for making money in an interview in Forbes Magazine.
He said that he has one simple rule and it is, "Don’t lose money." He said that if there is a possibility that you will lose your money, don’t part with it in the first place. This principal is so important that you should write it down and put it where you can see it. Read it and reread it over and over.
Time Equals Money
Think of your money as if it were a piece of your life. You have to exchange a certain number of hours, weeks and even years of your time in order to generate a certain amount of money for savings or investment. That time is irreplaceable. It is a part of your precious life that is gone forever. If all you do is hold on to the money, rather than losing it, that alone can assure that you achieve financial security. Don’t lose money.
Be Smart About Investing
The third corollary of the Law of Investing says: "If you think you can afford to lose a little, you’re going to end up losing a lot."
There is something about the attitude of a person who feels that he has enough money that he can afford to risk losing a little. You remember the old saying, "A fool and his money are soon parted." There’s another saying, "When a man with experience meets a man with money, the man with the money is going to end up with the experience and the man with the experience is going to end up with the money." Always ask yourself what would happen if you lost one hundred percent of your money in a prospective investment. Could you handle that? If you could not, don’t make the investment in the first place.
Action Exercises
Here are two things you can do to apply this law immediately:
First, think back over the various financial mistakes you have made in your life. What did they have in common? What can you learn from them? Accurate diagnosis is half the cure.
Second, invest only in things that you fully understand and believe in. Take investment advice only from people who are financially successful from taking their own advice. Play it safe. It’s better to hold onto your money rather than to take a chance of losing it, along with all the time it took you to earn it.
Posted by Brian Tracy on Nov 21, 2008
This is one of the most important of all the laws of money.
The Law of Investing - investigate before you invest. This is one of the most important of all the laws of money. You should spend at least as much time studying a particular investment as you do earning the money to put into that particular investment.
Check Every Detail
Never let yourself be rushed into parting with money. You have worked too hard to earn it and taken too long to accumulate it. Investigate every aspect of the investment well before you make any commitment. Ask for full and complete disclosure of every detail. Demand honest, accurate and adequate information on any investment of any kind. If you have any doubt or misgivings at all, you will probably be better off keeping your money in the bank or in a money market investment account than you would be speculating or taking the risk of losing it.
Money is Easy to Lose
The first corollary of the Law of Investing is: "The only thing easy about money is losing it." It is hard to make money in a competitive market but losing it is one of the easiest things you can ever do. A Japanese proverb says, "Making money is like digging with a nail, while losing money is like pouring water on the sand."
The Best Rule of All
The second corollary of this law comes from the self-made billionaire, Marvin Davis, who was asked about his rules for making money in an interview in Forbes Magazine.
He said that he has one simple rule and it is, "Don’t lose money." He said that if there is a possibility that you will lose your money, don’t part with it in the first place. This principal is so important that you should write it down and put it where you can see it. Read it and reread it over and over.
Time Equals Money
Think of your money as if it were a piece of your life. You have to exchange a certain number of hours, weeks and even years of your time in order to generate a certain amount of money for savings or investment. That time is irreplaceable. It is a part of your precious life that is gone forever. If all you do is hold on to the money, rather than losing it, that alone can assure that you achieve financial security. Don’t lose money.
Be Smart About Investing
The third corollary of the Law of Investing says: "If you think you can afford to lose a little, you’re going to end up losing a lot."
There is something about the attitude of a person who feels that he has enough money that he can afford to risk losing a little. You remember the old saying, "A fool and his money are soon parted." There’s another saying, "When a man with experience meets a man with money, the man with the money is going to end up with the experience and the man with the experience is going to end up with the money." Always ask yourself what would happen if you lost one hundred percent of your money in a prospective investment. Could you handle that? If you could not, don’t make the investment in the first place.
Action Exercises
Here are two things you can do to apply this law immediately:
First, think back over the various financial mistakes you have made in your life. What did they have in common? What can you learn from them? Accurate diagnosis is half the cure.
Second, invest only in things that you fully understand and believe in. Take investment advice only from people who are financially successful from taking their own advice. Play it safe. It’s better to hold onto your money rather than to take a chance of losing it, along with all the time it took you to earn it.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Misc. Investment Articles & Discussions (Nov08 - May09)
by winston » Mon May 25, 2009 7:46 pm
Sell in May and Go Away? by Ted Peroulakis
A common saying on Wall Street is "Sell in May and Go Away" - meaning May's a good time to sell your stocks and take a vacation from trading because the stock market is going to drop in the summer months.
Is this based on fact? Or is it some kind of myth?
Long-term statistics reveal that most market down periods do, indeed, occur over the six months from May to October. I crunched the numbers back to 1950, and it appears that the old adage holds water.
According to my calculations, if, for example, you'd invested $10,000 into the S&P 500 in 2008 with a strict "sell on May 1, buy on October 31" strategy, you'd have had more than $500,000 on May 1 of 2009. If you'd just bought and held the S&P 500 during that same period, you'd have wound up with less than $80,000.
So "Sell in May and Go Away" has a history of success. It also has some other factors working in its favor: the so-called Santa Claus rallies that typically boost November, December, and January performance due to holiday spending, as well as the market boost in April due to optimism about upcoming first-quarter earnings reports.
But past performance is not indicative of future returns, and this strategy does not work every year. Plus, there are negatives. You pay a higher capital gains tax rate on stocks you hold for less than a year, and you pay more in commissions than you do with simple buy-and-hold investing.
Source: ETR
A common saying on Wall Street is "Sell in May and Go Away" - meaning May's a good time to sell your stocks and take a vacation from trading because the stock market is going to drop in the summer months.
Is this based on fact? Or is it some kind of myth?
Long-term statistics reveal that most market down periods do, indeed, occur over the six months from May to October. I crunched the numbers back to 1950, and it appears that the old adage holds water.
According to my calculations, if, for example, you'd invested $10,000 into the S&P 500 in 2008 with a strict "sell on May 1, buy on October 31" strategy, you'd have had more than $500,000 on May 1 of 2009. If you'd just bought and held the S&P 500 during that same period, you'd have wound up with less than $80,000.
So "Sell in May and Go Away" has a history of success. It also has some other factors working in its favor: the so-called Santa Claus rallies that typically boost November, December, and January performance due to holiday spending, as well as the market boost in April due to optimism about upcoming first-quarter earnings reports.
But past performance is not indicative of future returns, and this strategy does not work every year. Plus, there are negatives. You pay a higher capital gains tax rate on stocks you hold for less than a year, and you pay more in commissions than you do with simple buy-and-hold investing.
Source: ETR
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Who is online
Users browsing this forum: No registered users and 2 guests