Saturday, December 31, 2011
Goals, strategies, and guiding rules
Using my own goals, strategies, and guiding rules I am developing an investment portfolio based on my needs. And I am going to beat the average!
Goals
Whenever you first go into an investment adviser or first go into buy mutual funds they always sit down with you and ask what is your investment style, and what are your goals. I guess those are good things to ask, but I think they are almost irrelevant. A more poignant question would be from me to the investment adviser asking them about their style.
And goals! Why on earth would an adviser need to ask about goals? Every single investor has one goal; to make more money, to end the year with more money than what they started the year with. Anyway that is my goal.
Strategy
My strategy works like this;
I select a number of stocks that have potential, whether they be dividend paying slow growth steady Eddie stocks, or stocks with [what I think have] huge upside growth potential. This is my initial stock pool. Generally I select stocks for the pool, but if Joe my plumber has a hot stock tip, or anyone else, and they have a good track record [sometimes just 'not a bad track record], and it passes my scrutiny it goes into the pool. At the time of entry into the pool its value is recorded. From here, if it is generally increasing in value, usually by 5% [this includes dividends] it can be considered for the portfolio. From there, I apply my investment rules to the stocks and whittle the portfolio down to the stocks that are showing steady growth.
Here are the Guiding rules
Stock pool
1] Generally, at he beginning of the investment year, select a pool of stocks using your personal criteria. For me these should be mainly blue chip dividend paying stocks with a small mix of high growth stocks.
2] From the pool select stocks that show an increase of around 5% to create the portfolio.. This requirement can be fudged if the stock shows long term [1 year minimum] steady growth. Dividends count in this selection.
Within the stock portfolio
1] As close as reasonably possible, buy equal dollar weight in your stocks.
2] At any time, if any stock drops more than 20% sell all of it.
3] Once a month review your stocks and;
a] any stock that has dropped
down 5% sell 25%
down 10%, sell 50%
down 15% sell 75%
down 20% sell all
b] any stock that has risen [and the portfolio has the money]
up 5%, buy 25%
up 10%, buy 50%
up 15%, buy 75%
up 20% double your holding
4] At the six month point review your stocks. If you want, sell 25% of stocks that have dropped. any amount.
5] Never sell a winning stock unless you absolutely need the money and then only sell the amount you originally invested in it.
6] Don't be afraid to changer or modify these rules if they are not working.
Friday, December 30, 2011
how to rate portfolio success
Coming out ahead is the best way to rate a portfolio's success, but I want more than that. I want some hard, real benchmarks.
This is how I am rating my portfolio.
beating the TSE average and BMOMIF will be considered a --------------------------> A
beating 1 of the TSE average or BMOMIF will be considered a ------------------------> B
a positive result but not beating the TSE ave. or BMOMIF will be considered a --> C
a negative return, not beating anything will be considered a ------------------------>Fail, and I go back to mutual funds.
After all, if I cannot beat the index or a mutual fund, why waste the time and effort.
Saturday, December 24, 2011
The plan
What I am going to do is create a portfolio, run it according to my guidelines and rules and see if I do better than the TSE average and/or a common, well known, well run, mutual fund, the BMO Monthly Income Fund [BMOMIF]
thoughts on my current investing skill
So if I'm so down on financial advisers and mutual funds why am I buying them?
Well, I hate to admit it, but I am also angry with myself.
On my own I can't seem to do better than any of the financial adviser or their most common mutual fund. I am not dumb, but investing sure makes me feel dumb.
Investing just doesn't seem to work the way I think it should. What I quite logically think should work, rarely does. And what I think is a cockamamie idea quite often will provide wondrous returns.
There is a Dilbert comic where someone and the pointy haired boss are talking about investing. The pointy haired boss says he made a killing in gold. When asked about his investment strategy he says he bought gold because it was shinny.
I know there is more to investing than buying the shiny things, but I also think my investment tolerance, how many funds are under management in a mutual fund, portfolio re-balancing, and the efficiency of the stock market, are all irrelevant or incorrectly applied. More on all of these a little bit later.
The real problems with my investing strategy is, as I said, nothing seems to work, so I do listen to the talking heads and end up all over the map.
I am sure I can do better than I have and better than a lot of mutual funds.
Friday, December 23, 2011
thoughts on investing advisers and experts
First off, I'm not really angry or dumb. I just feel that way when it comes to investing.
What I am is perturbed. I am an upset and unsettled investor. Nothing seems to make sense and nothing that makes sense seems to work.
To me Investment advisers and those talking heads experts seem to ask the wrong questions, and think the wrong things.
I recently bought some mutual funds from a well known Canadian bank and talked to a very nice woman that I know quite well. As we were talking I asked her if she followed the stock market. She said no, and that she just puts her money into this mutual fund and let it do all the work. It is great and reassuring the person selling me this is putting her own money into it but, that means I am buying mutual funds from a sales person, a person who doesn't really know anything about the market.
My wife has a financial adviser who is basically the same. She too is a really nice person, meets with my wife a couple of times a year, makes "ooh, this looks good" suggestions, but again, follows nothing and is just a mutual fund saleswoman.
They both may have taken a course and learned all the buzzwords, but that's it.
I think a recent ad on TV by another large Canadian bank sums up my view of [most] financial advisers perfectly.
I watch Business News Network. It is a TV channel all about investing. Yes there are a lot of talking heads, but there is also a lot of good information, and some of those talking heads have good ideas. Anyway there was a bank advertising their mutual funds on that channel saying investing in our mutual funds is just like online shopping. On a channel dedicated to investing research and analysis, saying "buy our product! It's just like online shopping!". Good Grief! Give your head a shake! That is one bank I'll never invest with!
So my anger is with the financial investment community and financial advisers. I think the financial investment community poorly understands their clients and have adopted a number of beliefs that they or their clients don't fully understand.
What I am is perturbed. I am an upset and unsettled investor. Nothing seems to make sense and nothing that makes sense seems to work.
To me Investment advisers and those talking heads experts seem to ask the wrong questions, and think the wrong things.
I recently bought some mutual funds from a well known Canadian bank and talked to a very nice woman that I know quite well. As we were talking I asked her if she followed the stock market. She said no, and that she just puts her money into this mutual fund and let it do all the work. It is great and reassuring the person selling me this is putting her own money into it but, that means I am buying mutual funds from a sales person, a person who doesn't really know anything about the market.
My wife has a financial adviser who is basically the same. She too is a really nice person, meets with my wife a couple of times a year, makes "ooh, this looks good" suggestions, but again, follows nothing and is just a mutual fund saleswoman.
They both may have taken a course and learned all the buzzwords, but that's it.
I think a recent ad on TV by another large Canadian bank sums up my view of [most] financial advisers perfectly.
I watch Business News Network. It is a TV channel all about investing. Yes there are a lot of talking heads, but there is also a lot of good information, and some of those talking heads have good ideas. Anyway there was a bank advertising their mutual funds on that channel saying investing in our mutual funds is just like online shopping. On a channel dedicated to investing research and analysis, saying "buy our product! It's just like online shopping!". Good Grief! Give your head a shake! That is one bank I'll never invest with!
So my anger is with the financial investment community and financial advisers. I think the financial investment community poorly understands their clients and have adopted a number of beliefs that they or their clients don't fully understand.
Subscribe to:
Posts (Atom)