"However beautiful the strategy, you should occasionally look at the results."
--Sir Winston Churchill
Bloody week in the market. For a couple of days my trading screens were bleeding red off the monitor and onto the floor as the momo boyz (momentum traders) blew out of last quarter's red hot stocks, locked in profits, and gave those late to the game a chance to buy stocks low in the morning, lower in the afternoon and even lower the next day. Charts for Apple, Amgen, Genentech, Walgreen, Yahoo, and just about all the housing stocks as well as just about all of the oil and gas stocks looked like hammered horse exhaust. But there is always more than meets the eye. If you were where the action wasn't or in the luke warm stocks or where the story is now rather than then, it wasn't bad at all. Check out the charts for my 401a funds and the table for my account. It's not as good as two weeks ago but it's not bad and it's not even close to making a dent in what I made last year. Stocks go up, stocks go down, and the wiggles are noise. But out of the noise comes the trend. If the trend is up, I stay the course. And if the trend goes down, I cut my exposure. I'll wait and see. Paying attention is what cuts the risk and enhances the reward. I'm standing pat 'cuz I gotta have a trend change proven to me, especially when the trend has been working so well for me since 9/04.
Speaking of risk vs reward, I got asked by Kenny P if I was in the aggressive program for the 401. I couldn't even start to answer the question. It was a good question if you got your investing info from a typical investment advisor because it leans on a lot of basic assumptions they start you off with. But it has nothing to do with the world I live in. Check out my site's longest term chart for all the funds. Eyeball the bond funds. The bond funds are "conservative" in that you probably won't lose your principle. There is not much risk. Neither is there much reward. You'll only make the coupon, and if you're really lucky, a dollar or two on appreciation, if they sell the bonds for you at the right time. There's little reward and little risk. And it is totally defensible. But last year you lost the chance to make money if you were heavily in the bond funds. And anybody in the Balanced Pooled Fund was 50% bonds. Most amazingly, you even lost money in bonds when a lot of other investors were making money in stocks. I'm not sure that is conservative. Last year I just didn't see any reason why I should be in bonds and and especially in bond funds. The charts tell you I was right. Set up an opportunity for me to do a presentation to a small group and I'll explain why.
Stock funds are considered "aggressive" in that you can make or lose a lot of money. There's CAN be a lotta risk and a lotta reward. But if stocks are in a long term uptrend and you pick the right stocks or funds and keep one eye on the trend and one eye on the exit door, AND you are willing to book profits and step off the elevator near the top, either on the way up or on the way down, the risk goes down. If the reward is high and you lower the risk, I'm not sure that is "aggressive". It's not so much that everything you've been told is wrong, it's just that it's not quite as simple or as direct as you've been told. Or so I believe. Of course I could be wrong. Oh, yeah. I also believe that you get told what serves someone else's purpose and not necessarily your own. What does "Modern Portfolio Theory" and the Modern Jazz Quartet have in common? More than you'd think. See ya at the hall.
[ view entry ] ( 876 views ) [ 0 trackbacks ] permalink --Sir Winston Churchill
Bloody week in the market. For a couple of days my trading screens were bleeding red off the monitor and onto the floor as the momo boyz (momentum traders) blew out of last quarter's red hot stocks, locked in profits, and gave those late to the game a chance to buy stocks low in the morning, lower in the afternoon and even lower the next day. Charts for Apple, Amgen, Genentech, Walgreen, Yahoo, and just about all the housing stocks as well as just about all of the oil and gas stocks looked like hammered horse exhaust. But there is always more than meets the eye. If you were where the action wasn't or in the luke warm stocks or where the story is now rather than then, it wasn't bad at all. Check out the charts for my 401a funds and the table for my account. It's not as good as two weeks ago but it's not bad and it's not even close to making a dent in what I made last year. Stocks go up, stocks go down, and the wiggles are noise. But out of the noise comes the trend. If the trend is up, I stay the course. And if the trend goes down, I cut my exposure. I'll wait and see. Paying attention is what cuts the risk and enhances the reward. I'm standing pat 'cuz I gotta have a trend change proven to me, especially when the trend has been working so well for me since 9/04.
Speaking of risk vs reward, I got asked by Kenny P if I was in the aggressive program for the 401. I couldn't even start to answer the question. It was a good question if you got your investing info from a typical investment advisor because it leans on a lot of basic assumptions they start you off with. But it has nothing to do with the world I live in. Check out my site's longest term chart for all the funds. Eyeball the bond funds. The bond funds are "conservative" in that you probably won't lose your principle. There is not much risk. Neither is there much reward. You'll only make the coupon, and if you're really lucky, a dollar or two on appreciation, if they sell the bonds for you at the right time. There's little reward and little risk. And it is totally defensible. But last year you lost the chance to make money if you were heavily in the bond funds. And anybody in the Balanced Pooled Fund was 50% bonds. Most amazingly, you even lost money in bonds when a lot of other investors were making money in stocks. I'm not sure that is conservative. Last year I just didn't see any reason why I should be in bonds and and especially in bond funds. The charts tell you I was right. Set up an opportunity for me to do a presentation to a small group and I'll explain why.
Stock funds are considered "aggressive" in that you can make or lose a lot of money. There's CAN be a lotta risk and a lotta reward. But if stocks are in a long term uptrend and you pick the right stocks or funds and keep one eye on the trend and one eye on the exit door, AND you are willing to book profits and step off the elevator near the top, either on the way up or on the way down, the risk goes down. If the reward is high and you lower the risk, I'm not sure that is "aggressive". It's not so much that everything you've been told is wrong, it's just that it's not quite as simple or as direct as you've been told. Or so I believe. Of course I could be wrong. Oh, yeah. I also believe that you get told what serves someone else's purpose and not necessarily your own. What does "Modern Portfolio Theory" and the Modern Jazz Quartet have in common? More than you'd think. See ya at the hall.
( 3.1 / 1241 )
Calendar
