Diversification weakens returns
abstract
Methods never mentioned
Now excessive trading is the enemy.
This method teaches control.
You rarely hear the media discuss this method.
Why doesn’t the media talk about ways to centralize portfolios?
The answer seems obvious.
A portfolio consisting of only a few stocks does not facilitate trading. Brokerage companies are among the largest advertisers in financial news networks. It is easy for these people to see that they make a living by trading. Trade! Therefore, it seems obvious why they do not promote this strategy that does not involve flow chambers. Financial websites need clicks and advertising funds to survive. It is very expensive to click on stocks, brokers and trading related terms. The best worded online stockbroker “; google’s most expensive search, ranging from $3.00 to $50.00 per click. Therefore, they are interested in promoting active trading. Therefore, it is not surprising that this strategy is not respected, or even ridiculed by the media.
The strategy I mentioned is effective for many people, including our members. The only regret is that it was not named long ago. We gave it the slogan, “; 12 portfolio transactions per year.”; after doing so, it should be called 7 transactions per year or 9 transactions per year. You will find it difficult for us to make 12 transactions.
It’s nothing.
I mean eliminating excessive trading. Overtrading is an easy mistake. We are all guilty. Boredom sometimes makes us do trades that we shouldn’t do. It is unexpected for a financial master to talk about the stock option activity. The acquisition may be ongoing, or there may be transactions that should not occur. The problem is that you can solve this problem from now on. Don’t do that. It’s that simple. Stop, stop now. If you don’t do anything, give up this bad habit now, and you will be rewarded immediately. This is not rocket science, but basic self-control. Do not trade without fully determining the risk compensation. But there will still be losers. Don’t make too many deals.
Warren Buffett, a billionaire investor, has a famous saying: “Diversification”. This is the protection of ignorance. “It is meaningless to know what you are doing,” he said. Basically, diversification is aimed at ordinary people.
How to implement this strategy.
Maintain relationships with news streams. Please keep your own information and wait. Waiting for activity. What case? We don’t know what we are waiting for, but we know there will be one sooner or later. When you wait, exercise your throwing arm by recording the stocks you think will rise or fall. For example, If the news this week is “news”, please record what you think will happen next week, month or year; record the stocks and industries that you think are overvalued and undervalued. Nvidia(NASDAQ stock code: NVDA) As we have done, let’s find out the trends and what the media can talk about in the next 3-6 months. When we wrote this article in March, the transaction price was $32.00. This will start preparing your arms. Just like the sports you are training. The more you do, the stronger you will be. Without proper training, you are bound to fail. Also let yourself be surrounded by like-minded thinkers. Find them. You will eventually become the product of the people around you. Do it in this way. You will be confident to take action. You are not afraid to enter a position of size.
“; mayor”; a crybaby.
I hate that experts treat the market as a person.
“; market”; i want this or that. “; market”; i hope the interest rate will remain unchanged or increase. Are you kidding? These statements are from educated people! I want you to notice how many times you have heard “financial crisis” statements on the financial media; the market ; it seems that they are a person. When they talk about this, it seems that the mayor knows everything. If you have listened to them enough, you will think: the mayor; five year old children cry for candy! “; market ; is composed of people. What do you think? People are driven by two main emotions. Fear and greed. Once you realize that fear and greed are the main driving forces of the game, only in this way can you see the stock pricing errors caused by this emotion. First, you need time to exercise. If so, you can start the actual process of implementing this strategy. This is where rubber meets road.
Supporters of the efficient market hypothesis say that all new information about the company’s value will soon be priced by the market.
This is the largest cow dung ever sold to the investing public. If this is true, what should I do with some friends. Did you make a lot of money by buying HealthSouth at the price of 19 -? 40 cents, recently sold at 6.00 dollars? Talk about typical examples of fear and greed! This is a typical case. Although I achieved the highest yield in my career in this game, looking back, I think how I should increase the bet. I still occasionally get a call from someone who shares HealthSouth trade: “I am a healthy South”. I wish I followed you. Or “; if I listen, I will make money; this is all the names of investment, trading, speculation or whatever you choose. You can almost always look back and see where you can do better. The same is true of ordinary life. Don’t let you stand by and watch those rare things.
Warning: This method may be boring.
This is where it gets boring. We are waiting. We are waiting. We wait for more. We began to think that this should be called “”. There are no transactions every year “; because of boredom. We think that opportunities will never come. We expect more. But sooner or later, they will come.
Recent examples.
Sometimes it comes slowly and gently, just like the oil trade alarm on February 12, 2016. The play feels like a slow motion. Almost everyone who can talk says that $20 oil will come soon. According to media reports, oil producers will start to pay us for fuel this week. Because the cost of storing cars is too high. Stupid low prices always exist, and no one can do it. I will never forget the old saying:; they buy when they cry and sell when they shout… It seems obvious. Therefore, American Petroleum Fund Co., Ltd.(NYSEARCA: USO) is an instrument that chooses to trade at 7.81 dollars. USO closed the transaction at the end of May at a price close to $12.00. I felt it was easy.
The United Leasing Company(NYSE: URI) bought at 46.60 US dollars in January. In retrospect, it was not as obvious as the oil price. Co renting companies are not the favorite of the media and are rarely mentioned. An alarm will sound when the conference call is in progress. The stock closed at $55.84 the previous day, down more than $10.00 due to misprofits. It feels like a huge overreaction. We know that there is no risk of bankruptcy or real liquidity problems. This is a typical case of being punished for quarterly losses. Two trading days later, the share price of United Rentals was $49.46, reaching $51.08 five days later. There is nothing to be ashamed of selling shares near the price level of $43.34 on February 11. However, the remaining shares in the URI have a closing price of $82.12 on August 23, so it seems that Rainman was chosen. But what’s going on? On April 27, we closed the position of the member reminder group at $68.07, and the group missed the next $14.00 profit. Do you know how you always look back and see how you can do better? You can’t be too obsessed with what you missed, but you can learn from it. Even if he only held 1000 shares, he changed $43000 into $68000. This proportion is hardly realized in the super diversified product portfolio.
Holy Grail?
This is not the Holy Grail. Is it bulletproof in this way? No, is it more dangerous? It depends on the answer of an academic expert. I can say that I prefer the opportunity to pick five stocks within 12 to 24 months, rather than 20 to 50 stocks. I prefer the dividend ratio. Because I can control my risk by entering my confident stock. The level of risk depends on the individual. You must have a psychological disaster plan. In a highly concentrated product portfolio, one should always have an appropriate escape plan. This can stop the game or insure through options. The most common way is to increase the number of down options and stocks you hold. This will give you a known amount of risk. If your trust is high, others may not be insured. This can be attributed to risk perception and personal preference.
This method is not suitable for everyone. One can only use part of his portfolio to do this. But once you realize; the mayor “; is not an omniscient entity; fear and greed”; it plays a huge role in the “World Cup”. “Market”; and you will become a better investor.
