Joan, I am a total bozo, and that's why SI is so valuable. It is one thing to be able to pick through the numbers and find problems and inconsistencies in companies like OXHP, but it is quite another to be able to assess the technologies and potential markets without a grounding in engineering. That's where SI comes in; it allows me to pick the brains of people with the technical expertise I lack and it allows me to ask those naive questions that books and magazines never seem to answer.
I think there are basically three approaches you can take to real-life investing (rather than market timing and hunting for "value"):
1. Put all of your money into an S&P index fund and just sit back and read novels and eat candy. This is a totally passive approach which should net about 9 - 11% per annum over a long period of time;
2. Choose a well-diversified portfolio of large cap growth companies. Around 15 companies like IBM, T, TYC, PFE etc. will do nicely. Just hold the companies and don't sell. Reinvest the dividend. This gives you lots of time for doing all the things you really like to do. This approach should yield a better return than 1. Around 15% - 17% is achievable simply because you have eliminated the 97% of the S&P that is expected to underperform;
3. Actively manage a focused portfolio of high growth stocks. This requires real work -- a lot of digging on SI for technical information, poring over financial reports, etc. It also requires nerves of steel and conviction. You must be willing to stay on top of technical developments, and ask lots of questions. This is the kind of approach where SI is essential. This approach can yield 35% - 40% over a year, but it can also leave you with sudden, unexpected drops (like when NETA dropped from $67 to $11). So again, you must be diversified among several tech sectors. And in bear markets you can feel crushed. But as the jocks say, "no pain, no gain".
I prefer to mix approach #2 with approach #3 because I am a risk taker.
TTFN,
CTC |
