You are at the doctor, and you have just been told the disturbing news that you tested positive in a routine blood test for a disease you know is rare but typically fatal. But surprisingly the doctor has suggested that you should not worry – the test is ‘only’ 95% accurate. Continue reading
I normally choose what to buy from my watchlist based primarily on share price momentum. This is for good reason – momentum is a proven phenomenon. However, this may mean I am neglecting occasional opportunities to ‘buy the dip’ in the less well-performing shares on my watchlist i.e. buying shares when their prices have (hopefully temporarily!) fallen. A number of the shares on my watchlist have recently successfully recovered from temporary dips. Buying the dip could be a useful addition to my arsenal, so I’ve thought through whether and when I might employ it. Continue reading
Since I started writing this blog, I’ve written a lot of posts about the mechanics and implementation of my strategy. I wanted to write something more high level about what I think it takes to be a successful private investor. A post more about the principles, or way of thinking, rather than how any particular strategy should work. I’m not a hugely experienced investor so take what I say with a pinch of salt – though hopefully my ideas are at least thought-provoking.
For those not very familiar with investing it is natural to assume that an amateur private investor must be at a big disadvantage to the professionals. After all, stock-picking is a zero sum game. Surely it must be difficult to win at this game at the expense of the people who do it for a living. These people have greater knowledge and expertise, have spent much more time honing their skills and benefit from better access to information and to company management. Continue reading
I’ve been wanting to write a post on a more big picture topic for a while. Macroeconomics has come to the fore in investors’ minds, with recent volatility prompted by concerns about inflation and interest rates. As a professional economist (though not macroeconomist), I do feel a sort of duty to be able to say something about the macroeconomic situation. However, after a few attempts at starting a post, I’ve discovered that I don’t have anything very illuminating to add. Trying to predict the economy as a whole is complicated and feels too much like guesswork. My view is straightforward: I’m optimistic at the moment because, having thought about the obvious concerns, I don’t yet see good reason not to be.
So instead of macroeconomics, I’m writing about another more interesting and useful big picture topic – horizon scanning.
I’ve always been motivated by the idea of finding an ideal mechanical strategy in investing – a magic formula. One that doesn’t require much thought to implement once the groundwork of setting it up has been done.
I’ve got pretty busy recently and am looking for ways to manage my time more effectively. One of the things I’ve been considering is whether there are any ways to simplify my approach to investing to something more mechanical. Continue reading
For a little while I’ve been meaning to write a post on selling into strength i.e. selling when a share is rising in price. A couple of things have prompted me to consider whether I should sell into strength more often. The first is some of my experience last year, where I gave back most of the gains on a few profitable positions, when the market became a bit choppy. The second is reading a couple of books published by momentum investors (O’Neill and Minervini) who seem to swear by it. Continue reading