OK, Joe, if you think seriously about adding when things are cheap (like now) and reducing when things get fairly or overvalued does that not amount to actively trading or market timing as opposed to buy and hold?
I have had mixed results with adding to losing stocks. It seems to work well with big companies. I got into Intel several years ago and doubled my holdings when the Pentium bug came out, so that worked out really well. On the other hand, with some small companies, there is a very real possibility of "catching a falling knife". I have tried to catch some companies on significant dips, double up as they fell even lower, and watch to my horror as they continue to fall significantly. All in all, I have not had good success in adding to losers. Maybe you get a feel for valuation of a stock by owning them, but I would prefer to get this feel without feeling the pain.
I am not sure if short term trading with stops in place to limit pain works that well either. I had Tellabs a while back with a nice gain under my belt. Sure enough, they managed to stop me out at $65 just before they went on to $75 without me.
I am finding you have to set the stops pretty wide (about 20%) and be prepared to accept a good deal of pain in order not to get left behind with high beta stocks. Of course, a 20% loss seems to be better than the average 57% loss that Don calculated for the semi-equip group. I am begining to find that you have to plan a way out for different senarios, including going down right after you are in, going down after a big gain, or just smiling and taking your money off the table after a big run up.
Still looking for that best strategy, and appreciate hearing others and their opinions on how best to deal with volatility. |
