While we advocate expending the least amount of effort necessary for investment success, one urgent requirement is monitoring your portfolio to catch the poor performers before they do too much damage.
Our “rule of five,”—a convenient, statistical pigeonhole into which we can cram every failure—suggests that fully four out of five companies we select will do just fine, one even doing better than we had expected. The nice thing about that is, if we’ve selected carefully, the eighty percent of those we’ve selected will perform well enough to keep our portfolio’s performance from being too badly damaged. Read more…
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Since the first half of last century, many who were new to fundamental investing but who wanted to explore its benefits found it helpful to form an investment club. While it would seem a good idea to consider joining an existing club so that you might have someone with more experience available to learn from, I would suggest that it will work even better to form one of your own and start with everyone having the same experience level. That way, you can learn together and no one will feel left out or, worse yet, impatient with you while you’re learning. Some of the benefits of an investment club include: Read more…
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A question arose recently on one of NAIC’s message boards asking whether the time was right to sell a stock that had gotten a little ahead of schedule in appreciation, and whose return had declined some. “Isn’t it time to get out and take some of the profit?” [My thanks to Ron Cooper.]
The quick and simple answer is “Never sell a stock to take a profit!”
I would hastily add that this does not preclude your replacing a stock with one of as good or better quality, and a better potential for return. But there’s an important distinction between those two concepts. Read more…
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As you know, we’re out to “change the world.” And to do that, we need lots more readers to get the message—to understand what “investing” really is (as opposed to what they’ve been led to believe it is).
Today’s news is full of the dangers of spreading disease from person to person. But there are good viruses too! And that’s exactly what we need here! This message needs to go “viral.” It needs to be so exciting and interesting that new folks, young folks, hear about it and are captivated and excited about it, and motivated to recommend it to their circle of friends—and they to theirs. Read more…
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We now want to purchase the stock we selected. And, if we were populating a new portfolio, we could have gone right down the list of candidates, confirming the quality, evaluating the price as we did with FDS, and putting them all on our shopping list.
Of course, you can use whatever broker you’re accustomed to. However, I’d like to take this opportunity to introduce you to a new and special kind: a folio brokerage or “window trader.” This is one that saves money by combining all of its clients orders into one, filling what “sell” orders it can with its own clients’ “buy” orders and vice versa, going to market periodically with a large single order of shares remaining to be bought and sold, and finally distributing the shares among its clients electronically using fractional shares. This is called “Window Trading” and the savings are passed right along to the client. Read more…
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Not long ago, after seeing one more newspaper article praising the virtues of The Stock 
Market Game, I yanked my gun off the rack and fired yet another salvo at what I consider to be a terrible influence on our children.
The article probably mentioned that the program teaches our kids such things as short selling and using margin to leverage their hypothetical portfolios so as to help them better manage their pretend-$100K and increase the kids’ chances of beating their competitors. I view these things to be about on the same level as teaching them about the pass line on the craps table!
Nevertheless, in response to a comment on that post, I suggested that it might be time for me to quit complaining, talk to the folks who run it, and see if they might be receptive to some suggestions to perfect it. …and then I did it.
Read more…
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The main reason I’m putting so much time into this blog is because I believe it’s really
important to reverse public opinion about investing. Except for relatively few of us, almost everyone thinks investing is scary—a hazard to one’s financial health. They’ve either been burned or are close to someone who has.
They know nothing of the benefits of owning shares of American industry which, no matter what the stock market does, continues to produce its goods and services and grow—and reward its owners. They think of investing only as betting on the daily ups and downs of the market and hoping they can buy low and sell high enough times to win some money.
But one or two of us blogging out here isn’t going to be enough to make a dent in public opinion unless we suddenly get very popular. What do we need to do for that to happen?
There might be another way. How about forming a coalition of all the organizations and individuals who stands to benefit directly from such a change in public perception. Together, we might be able to mount a campaign that could attract enough attention to get the job done. Let’s start a list of those we believe would benefit.
What do you think? Any ideas? Do you have enough interest to make it happen?
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The world of investing has been split into two very different camps: those who subscribe to
technical analysis and those who prefer fundamental analysis. The former boast that they couldn’t care less what business a company is in, how long it’s been in business, or anything else about it, except for the price its shares sell for and the number of shares that sell. They create colorful computer charts seeking patterns in the price and volume movement with which they might divine what the market will do next. Largely traders and short-term gamblers, they provide the securities industry with the bulk of its compensation because they are constantly watching the market and will buy or sell at the drop of a hat. Read more…
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One of my friends said to me the other day, “Ellis, I like your blog and appreciate the ‘how-to’ articles you’ve included in the Articles section. But I’d like to know just exactly how you do it, yourself, one step at a time.”
Well, I’m game. I usually try to post something new every Tuesday and Thursday. Now I’ll add one more post during the week. Over the next six weeks, you’ll find out how I …
1) Find a company that would be a good candidate to invest in.
2) Analyze the quality to confirm that it’s worthy of consideration.
3) Determine a reasonable price to pay for the its stock.
4) Add the stock to my portfolio (some thoughts about brokerages)
5) Follow the stock once I own it.
6) Determine when to sell it.
If this is something that might interest you, why not subscribe and have these posts delivered to your PC’s “doorstep” as they’re published. It’ll probably stimulate some spirited arguments from those who insist you have to do more. (I say you don’t.)
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There’s one guy out there who had it nailed a long time ago. A one-man crusader with the tools to expose Wall Street’s flaws, he was on national talk shows, made his points eloquently. Must have felt like a mime on a street corner: everyone could see him, but no one heard him. How frustrating it must have been for him to have been labeled a sensationalist and a paranoid (by those threatened the most) and not be taken as seriously as he should have been then. [Hey, just because you're a paranoid it doesn't mean they're not out to get you!] Read more…
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