Do Not Try to Catch Them All

Written on Sunday, August 24th, 2008 at 4:28 pm
Filed under Buying Stock.

What is you investment approach? Let me explain why I ask you.Most people start by buying a mutual fund. If you want to know more about investing you can start by investing yourself.Then there are more options. What is not really possible with a fund, becomes interesting when dealing with stocks and options; Technical analysis (TA).

So your portfolio has now a few funds, some stocks and options. You can manage the funds by observing the fund service, they give you leads to buy, switch and to sell. For the stock you can use the technical analysis.

Again, you find out some more and you analyze the stock in portfolio on a more fundamental way. You split your portfolio in parts where one part is monitored by technical analysis, the other by fundamental analysis and the last (funds) are assessed by your bank.

At the end of the (first) year you have made a absolute return of x-percent and relative to the main index (what would that be for such an portfolio, but leaving that aside) you have a small underperformance. But not for the part technical monitored.

That part was going well so you decide to increase your method on that behalf. However, the market is going down. You have to sell all the stock in portfolio according to the TA --

When observing the newspaper you find out that you fundamental monitored stock were indeed not real candidates for selling. The market is still down, but those stocks are performing well. So you decide to buy them again.A few months later the market is going up, but the fundamental ones are underperforming again. So you sell them and buy new ones with a technical approach, back in favor.

At the end you know that one approach seems to fit best with your personal style. That can be the approach youve started with. It can not be switching from one method to the other.

As it is in business. You can try to catch them all, but you will fail in the attempt.

2005 Hans Bool

Hans Bool is the founder of Astor White a traditional management consulting company that offers online management advice. Astor Online solves issues in hours what normally would take days.You can apply for a free demo account

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