My Investing Target
Hi Mark, Become a Complete Fool
Wonderful post � And the replies from NN and NJ were quite thoughtfully offered. I remain impressed by not only the quality of posts here (even though sometimes the volume isn't all what some would like), but also by the quality of the people here. So I guess its time for me to offer a bit of a contrast <g>.
"I want to learn how to make investments that actually make money over the long term, without having to spend my life agonizing over when to buy and when to sell, and what to buy and what to sell."
I agree that's pretty much what we all are aiming at in one way or another. But I wonder (as us old lupines do at times � it beats chasing bunnies ya know), how do you know you haven't already been offered what you seek?
" I have now spent over 3 years experimenting with the topic of investing. And I've done what I usually do. Wandered around, by all appearances, aimlessly. I've experimented with Rule Breakers, and Rule Makers, and stock screens. And technical analysis. And fundamental analysis. And financial analysis. And valuation. And combinations of the whole bunch. And I've learned some basic things about myself, and about the landscape of investing..."
Ahhhh .... er ... so how long do you believe one should "test" any system for "making money over the long term"? <mischievous wolven grin>? Or maybe the more telling part of your quest's goal has to do with your "agonizing over when to buy and when to sell? Are you "certain" that all you have tried would fail in the long term?
Maybe the sage dogma from NN and NJ about never falling in love with a stock is more a starting point than an end in itself? Maybe we need to also not fall in love with any "system", nor hate or fear or even agonize over any aspect of investing? Maybe it really is as straightforward as I was told as a young pup: Don't do anything unless you are willing to do it to the best of your ability and if you do something, then do it and don't look back. And if you do your best at whatever, then take comfort (if not pride) in a job done as well as you could. There's no future (or happiness) in expecting more from ourselves than our best efforts. And when we do make mistakes (and we all do and will) learn what you can from them and be thankful � because there are too many wolven comrades who will never have to worry about making mistakes ever again.
"1. The stock market is ever changing, and only God (if you happen to believe in God) has ..."
Amen Brother! <g> I even suspect that there really isn't "A" stock market. It's rather much more interesting than that. It seems to me there are multiple industries that have a rather fluid dynamic linking them � sometimes the links are strong and at other times they weaken or run counter. Even worse, the individual companies within any industry may have significantly different philosophies, business models, competitive (dis)advantages, etc. OK ... so investing would be so much easier if things were simpler and more straightforward ... but it isn't, so let's not get bent out of shape by reality. [Leave] that to others while we try to do our best with what we have to work with. Me? I try to carefully study and learn things on the left-hand side of charts so that I might apply it past the right hand border. But sometimes .... Ahh yes ... sometimes that data patterns shift faster than a scared long-eared hoping machine - the left will in no way reflect what's coming on the right.
"2. Company research is simply a way of making a less wild guess as to ..."
I do like your style <g>! And yes I agree in the sense that company research at best just alters the odds a bit, hopefully in the diligent and competent researchers favor. OK ... no wolf tears about that. In fact I LOVE the notion that odds for success can be altered, if even only slightly by things like company research. But maybe that's because us old lupines believe essentially NOTHING can be certain. So we celebrate the simple fact that there are ways to generally reduce some uncertainties for us, if we are willing to expend the necessary resources, including maybe patience too <g>. In a world such as this, no one can ever be certain of achieving long-term positive returns from investments and so the best we can do is maybe improve our odds a bit (nor can one ever be certain of what system will work best in the long term until the long term actually happens <g>). That doesn't make me sad or glad, anxious or peaceful, etc. but it does make me want to do what I can to make my odds as favorable as possible. And I do so with the full knowledge that no matter what I might do and how well I might do it, things outside of my control may negate all my efforts. Such is the lupine life ... is it so different for those who go on 2 legs?
As for the Enron's et al ... I certainly ain't the smartest furbearer around, but when I looked at Enron ages ago from an FA [point of view] ... I couldn't figure out their financial reports. So many footnotes and things that weren't straightforward. I couldn't understand it and so sniff as I might the attractive potential, I lifted a hind leg and moved along as more than a few others seemed to do too <g>. But your point about there being tricksters in the world ... OK ... sometimes we will get our fur singed. But on a cold snowy night I'll still move towards warmth and not away from it.
"3. Investing using Technical Analysis, while never boring, is not something for people with limited funds."
What a wonderful and insightful 2 legger you are! This has been one of my ... dare I say it .. pet peeves .. about all the backtesting and systems and great work folks here do. They seldom if ever give one a hint how high a pile of actual buckos are needed to run the system through the inevitable false signals etc. That may be one of Nukies most valuable lessons for me (and others I m sure) � limiting how much is in equities and how much within any one equity bet one should be willing to lose! If losing X% on an equity bet would bother you more than a flea high on your back, unless you can reasonably limit your potential loses to less than X%, maybe the bet shouldn't be taken! Stop limit tactics deserve much more celebration than they get.
"4. Fundamental Analysis has some good points, but... FA, in and of itself, is insufficient as an investment method for me ... All FA does is help me decide what companies might be worth investing in."
Yep ... that's about the best it can do ... increase your odds a bit over the long term. Me thinks that any non-fur bearer who has learned such a thing should celebrate, because clearly most never get that far <smile>. Also, I happen to like celebrating and am always looking for any excuse <wink>.
"5. Valuation is simply another piece of the investing puzzle."
Right again! I find valuation particularly vexing though, sorta like sheeps in wolfen cloaks. I mean they toss around all these great looking formulae and involve lots of iterations and mathematical finesses and so lull one into believing they must be quite accurate (and valuable <g>). Yet it's all based upon assumptions that are not absolute or certain in most regards. Garbage in = Garbage out. Still, I find it useful. Being a VERY conservative 4 legger, I make VERY conservative valuation assumptions. So much so that the vast majority of companies still appear very overvalued to me. It doesn't mean that those I believe to be undervalued will certainly perform well, but again it sure does seem to help increase the odds. Again, I have to credit NukeJohn, as he has steadfastly maintained that FA can make a significant difference if used as a "filter" for applying TA. But the FA has to be well done and consistent and dare I say, more conservative in its expectations than many seem to favor. And even then, all it does is slightly alter the number of winners we pick to the number of losers. It sure does look like over the long term we get to enjoy slightly better odds. Then again, trusting monkeys throwing darts at the universe of stock picks generally beats about three fourths of all actively managed funds ... so .... <g>.
"6. Portfolio churn is a good thing if you have tons of money, and tons and tons of time."
Here I don't quite agree with you ... I agree with your apparent frustration though <smile>. The more the churn, the more the burn. Maybe if ya got a bigger bundle than ya need, ya don't care about such things. I mean if Uncle Walt bit the big one and left ya gazillions, what's churn matter. But if ya had to sweat and work and cry for years and then some greedy immature idiot profits at your expense ... Maybe more species should occasionally eat some of their young <snicker>. But if one is aiming at long-term investments ... ahhh ... why churn much at all? And why even consider TA systems / perspectives that are focused on less than long term characteristics i.e. momentum?
"7. The land of KP is not a good thing for me. The KP discussion of the past year, centered on NJTA, and similar topics, would require more portfolio management work, and portfolio expenses, than I can afford. It's that simple."
Ahhhhh ... grasshopper ... seeking outside for answers that lie within risks turning yourself inside out. <g> Au contraire ...Learning as you seem to have done that short and mid-termed systems are contrary to your investment goals would appear to be a VERY valuable lesson. I have heard that people pay tens of grands and spend 4+ years in institutions learning such things � sometimes <smile>. And while I too lament the apparent lack of respect of FA here in KP land, there continually are references even here to places with other views on FA. In fact you mentioned you looked at things like Rule Makers etc. that are pretty much exclusively FA based systems. Me thinks as NN and NukeJ have offered, as individuals we need to learn all we can about as many different investment approaches as we can. Then and only then can we have a CHANCE at finding a method for investing for ourselves that we can be comfortable with. In wolven parlance we have a saying that � it's important to make our own mistakes, because if we survive 'em we can learn from 'em. Whereas little is ever learned from repeating the mistakes of others, otherwise we would have learned from their mistakes in the first place <smile>.
"And I'll let the above stand as the starting point for my adventures in the land of investing in 2003."
What a wonderful starting point! I look forward to seeing you farther on down the year's paths!
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