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Strategies & Market Trends : The Art of Investing

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Dec 24 4:00 PM EST

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To: towerdog who wrote (5604)	9/30/2022 11:46:17 PM
From: Sun Tzu	Read Replies (1) of 10713

What you are missing is sizing. I admit that is the hardest part of investing and I am far from being skilled in it. But nobody knows where the bottom really is. This is one way to help the market let you know. Let's go back to the example of oil in 2020. The world had shutdown and there was no end in sight. There were no vaccines. And everyone believed that working from home and EVs would substantially and permanently reduce the future demand for oil. It seems silly now, but that was the dominant thinking. Had that not been the case, oil would not have traded so ridiculously cheap. Did I know where the bottom will be? No. When I started buying oil in late summer, I expected to be holding that position for a few years. Why? Because the mainstream thinking seemed at least somewhat logical and nobody can fully separate himself from his environment. In reality, in less than 4 months I made a 7x profit and stupidly I sold early and left much on the table. What about the calls for $350 oil earlier this year? (Or $7 copper?). I warned about that and got flak for it. But within a few short days oil began to drop. If I had actually known where the top in oil was, I would have shorted it. But figuring out the top is harder than knowing the bottom. My point is that we as an investor, rather than a trader, figure out a timeframe and risk/reward that you can live with. The pace yourself and ease into that position. I have mapped out enough GTC buys for XBI that my final order is an order of magnitude larger than my first one. Most likely it will not get filled. But I am ok if it does and still goes lower. And this is the other pillar to tape fighting strategy. You cannot do it for something that would gnaw at you if you keep buying and it keeps going down. It has to be something that you are sure about (keeping in mind that the market can do anything). Or as Buffett puts it, you should be comfortable to not look at the price for years. If you have such a company at such valuations and you are pacing yourself properly, then the odds are that you will end up using a big chunk of your allocated capital on the way up because your last GTC won't get filled. PS What is the market pricing for BXP here? What odds would you assign to it? What risk premium would you demand?

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