Sunday, October 21, 2012

Tips For Investors.

I have couple of tips for Relaxed Investors:

1.       Remember that Investment if different from TradingThe successful investment strategy differs markedly from trading.  It is especially important to establish good, long-term positions when prices are favorable. Most individual investors seriously underperform long-term results by selling low and buying high.  Most successful professionals, of course, do the opposite.
             Even successful years have significant drawdowns.  15% is not unusual.  The investor needs to   expect this.  If it feels stressful, then your asset allocation is wrong.
(H/T Jeff Miller)

2.       Realize that we are no expert on world events: However much ZH or some such blog or various talking heads on TV explain why the world is going to end soon, world is not going to end that easily. Investing based on bear talk can be harmful to the portfolio. World may or may not end tomorrow but investing based on personal belief is not a good strategy.

One of my favourite strategy is to have patience and remove the fear of missing out from the mind. I have not been active in the market for the last few months. During these times, market has gone up and down many times in the most unpredictable fashion. Nothing and nobody can say with any degree of certainty which direction the market will move next. Why take the burden of emotional pain in such a market? So I am looking for what would be a long term trend and trying to get in slowly for a long haul.

For next week, my 2 penny advice would be the same. Patience and do not chase either way. Monday we may see some more selling to start with but an eventual bounce. The market would chop around till end of October. Gold most likely would form a bottom around 24th-25th October. And thereafter a longer term up trend (relatively speaking) for equities till mid-November.  Let us see how things develop.

Thanks for all your support and kind words. Have a great Sunday folks.