An interesting perspective on our recent discussions about strategies. Obviously it ignores the idea that buying a value stock at a cheaper price means a better value. But worth considering:
To:energyplay who wrote (17869)
From: dabum3 Wednesday, Feb 5, 2003 2:33 PM
View Replies (1) | Respond to of 17916
One of the biggest mistakes I have made in the past was worrying about price. I always assumed it was important to buy a stock at the right price, to try and get it on the cheap. If the bear market has taught me anything, it has taught me that price doesn't mean anything in the world of trading/investing. It's the rate of return that's important.
The rate of return.
It doesn't matter what the price is, it's the rate of return on our investment dollar. Does it really matter if we pay 50 cents or $50 dollars if the rate of return on our investment is 20%?
Since I have adjusted my thinking to buy stocks that are rising, my portfolio hasn't shown a negative rate of return in almost two years. That doesn't mean I haven't had losing trades, because I have. Since I was buying stocks that were rising, my winning trades far outweighed my losing trades and I have done it with very little risk.
If we were to sit down and come up with a winning strategy for investing, I find it hard to believe we would include trying to catch bounces off stocks showing huge declines. Although we can have success with this strategy from time to time, it isn't a strategy that produces consistent profits. Neither does the strategy of averaging down.
I know from my years in sales that one must develop a winning strategy if one were to have consistent results. Consistency was very important to me because I was paid by straight commission. If I gambled or cut corners and didn't succeed, I didn't take a pay check home, and this happened on many occasions until I learned to follow a winning strategy and concentrate on consistency.
I have assimilated this strategy to investing and I am amazed at the success I am enjoying without all of the risk. I won't have the highest returns, but being consistently profitable is my goal.
If I can show a profit in years the indexes are down, and beat the S&P 500 in years it shows a profit, then I will consider myself successful. Setting realistic goals is part of a winning strategy.
There are a lot of ways to make money in the market, but from a risk to reward basis, based on my objectives, I'm only interested in buying stocks that are rising, as opposed to trying to catch bottoms. Being a hero isn't one of my objectives, beating the S&P 500 on a consistent basis is.
I earned many awards in management because I worked with my strongest people. I let the weak ones die on the vine. The weak ones took too much effort and wore me out. The reward didn't justify the effort. That's how I'm looking at investing now. I'm looking to buy strength. EP doesn't look like a winner to me. When it does, I'll buy, but the price will be higher than it is today. I don't need the grief. I'm looking for rate of return. Price doesn't matter to me anymore.
All in my opinion, of course.
dabum |
