Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.
Many of you who visit this blog are used to my stock market ideas that really are based on a combination of price momentum and fundamentals. I continue to believe that this basic idea about selection of stocks is sound and important for every investor to consider---whether they be novices or pros in stock selection.
Perhaps more important, underlying these selections, I have continued to emphasize my own idiosyncratic methods of dealing with stock market moves by automatically moving into and out of stocks in response to the signals generated by my own holdings. This may turn out to be the more important part of my own thinking and I continue to implement this approach in my own trading account (except for an occasional "trade" that I have executed at my own disgression!)
Simply put, I sell my gaining stocks slowly and partially at targeted appreciation points and sell my losing stocks quickly and completely at pre-determined levels.
Let me explain this process one more time.
For my own use, I have set my holdings at a limit of 20 positions. Currently I am holding five stocks. In initially entering the market, I would suggest that an investor start at 50% cash and 50% equities---a position that I would describe as "neutral". In other words, commmitting 5% of cash to each of the ten positions. As a saver, I would also encourage the automatic deposit monthly of whatever amount is appropriate to each saver to grow each account over the 'long haul'.
After reaching this point, I would allow the market to determine future responses to the portfolio.
On selling stocks on the upside, I still recommend selling 1/7th of each holding at certain appreciation points---for me I utilize gains at 30%, 60%, 90%, and 120% levels, followed by larger intervals reaching 180, 240, 300 and 360%, then 450%, 540%, 630%.....etc. At each sale at a gain, I view this as a signal that the market is "o.k." and give myself a 'permission slip' to add a new holding....unless I am at the maximum of 20....in which case the sale would simply go into cash or paying down margin as the case may be.
Sizing of sales (above 5 positions---the minimum) are now set at 125% of the average holding size for the new position.
On the downside after an initial purchase I allow an (8)% loss to completely step out of a holding. After a single sale at a 30% gain, I sell the entire position at 'break-even'. If I have sold a stock more than once, for instance 3 times at 30, 60 and 90% levels (selling 1/7th of my holding each time), I sell if the stock should decline to 1/2 of the highest percentage level----for 90% appreciation sale, I would sell the entire position should the appreciation level decline to 45%. With these sales I 'sit on my hands' unless I am at my minimum of five holdings, in which case I replace that holding with a smaller sized position which would also decrease my exposure to equities.
The smaller-sized position, instead of being 125% of the average, the size of a new position on the upside above 5 positions----the smaller-sized position is at 1/2 of the average size of the remaining holdings.
This is what I do.
I believe it would help any investor step aside in a bear market like we are continuously being exposed to. It is working in this regard for me.
It isn't rocket science. It is common sense.
Is anyone listening?
Thanks again for stopping by. I shall be going off to work in my 'day job' now. If you have any comments or questions, please feel free to leave them on the blog or email me at firstname.lastname@example.org.
Yours in investing,