Making wise investments

Thanks for the warning. What investment have you researched other than BRK that looks good?

sorry for the late reply....i studied benjamin graham and a little bit of warren buffet and have come up with an investing stragety of my own. it is no way similiar but has some key ideas. if you are wondering what i think is good, just follow my profile. also check out NDarvas profile. studying nicholas darvas and using his method as my short term method and my new method as more of a long term approach.

thanks for the comment.

All stocks are speculative, subject to all manner of risk - black swans and otherwise. Ultimately, they're just paper representing a perceived value. I know that people think of BRK the way they thought of LU (Lucent Tech, and others), stocks that were once great, but due to some event, fall to zero.

Having a methodology is critical. Setting trailing stops, and harvesting profits on the way up until you have recovered your initial capital are probably the two most important things you can do in setting up a position, and only then will you not have to worry about when a stock goes down b/c you're protected b/c you know your exit and you have your base capital back in hand.

"they're just paper representing a perceived value"

Well you are in a way correct, but not entirely. If you own all the "paper" of a particular stock you then own an entire company.

It sounds like your methodology is more from a technical trading perspective than valuing stocks as an investment but regardless a methodology is necessary to be successful as well as having an exit strategy.

Hey Beancounter:

I thought of this after posting ...Actually isnt any currency just paper representing a perceived value? Sometimes all the moving parts of finance are enough to drive one nuts... I love investing.

beancounter im going to agree/disagree with your position.

Nicholas Darvas realized this....that a buy stop order must be placed to insure that he is buying the stock while rising and a trailing stop loss order under the stock in case the boxes tumbled downward. i use this in my NDarvas portfolio. since he is a techno-fundamentalist, these elements fits well.

my disagree part of your comment is that this doesnt always hold true for value investors. trailing stops are mostly not necessary. calcuating the instrinic value of a company is their greatest asset....that is why you dont see warren buffet using a trailing stop loss or ever talk about one.

i just purchase another Nicholas Darvas book on amazon. i will keep updating and improving my methods. want ever you do invest in education. i rather personally have the 40k income when i go out on my own plus the degree for prestige. i mean education as learning something more than what you already know. (books, professionals, engaging yourself in the activity, etc). thanks for reading

I will check out the books - but I don't see why you wouldn't place a stop under any investment.

And yeah, Vic - everything is perceived value. Think about art - one man's dead flies is another collector's treasured buy.

http://www​.artchive.co​m/artchive/​H/hirst.html - Damien Hirst, imho, the best con man in the art world.

Why you wouldnt put a stop under any investment:

If you thought the lower price was a better buy than where it currently was. For example there are alot of stocks I see as overpriced right now but would like to own or purchase more if the price drops. I would rather hedge with selling calls or buying puts and not necessariy get out of a position altogether if a stop gets triggered or if I thought the price was going to go down.

I think it primarily depends on your strategy and the type of stock too.

Beancounter:

By the way, I know of several market makers that drop prices to trigger stops so I would rather be a buyer at that price than a seller. Just my thoughts.

Oh, no doubt, you can do that when you have access to the limit order book. I suppose conversely, that's also why you'd have multiple buy orders across a range of prices to buy at that lower price. Good thoughts! Thanks to all who posted. This is why I like to participate in MG.

My two cents:
I don't believe that a company's intrinsic value needs to be calculated. I believe stocks are perfectly priced at all times. What changes is A). The amount of money in the market. and B). The company's future performance.
My philosophy is:
* stick to companies you know and like.
* Always stay within a set allocation.
* Set numeric goals for your portfolio value and take profits once you've surpassed them.

I think the discussion is getting off tangent from the original question. But here is my view.

One MUST develop his own approach and style to investing that makes him/her comfortable in terms of risk and return. Each investor has his own threshold. This is first and cardinal rule of my investing.

The second important decision you need to make if you want to be a a DIY investor/trader/speculator - whatever, or you'll let professional money managers (for better or for worth) do the investing for you. In this case you still need to decide who, how much, and make some other basic asset and style allocation decisions. This is not an easy process and a process it is. For the purpose of this thread I assume we are all DYIs.

I truly believe one can be successful using a number of different styles. You ca be a great technician or a very strong quant or fundamental analyst. Or you can be good at using a combo method. The point is it has to be the right method for you and you must continue to work hard at it, as things change and you need to adopt your methodology to the current market conditions. Not radially change it- but adopt, as things continue to change. I can site numerous examples - but I think its well understood.

As far as risk management I totally agree with what Guliamo said. YOU MUST KNOW THE STOCKS YOU INVESTING IN. Don't blind follow anyone either here on MG or reputable investors you see on TV or read about. IF YOU HAVE NO IDEA WHAT YOU OWN AND WHY, HOW DO YOU KNOW YOU NEED TO BUY MORE OR SELL IT ENTIRELY WHEN THE STOCK IS DOWN 15% in a day? How can you honestly feel comfortable doubling your investment in a face of such a loss without just gambling if you have no idea?


1) Don't just follow anyone blindly - what works for them may not work for you. Do your own work, use ideas from other as a starting point ONLY. Know what you own and stay on top of it. Even if its only 3 stocks.
2) Risk management is a must. Use predefined loss parameters. Blow your losses out if you have no idea why its down or have no conviction.
3) Have a plan and stick to it - you have to have a basic idea what YOU believe the market is going to do, and invest accordingly, but YOU MUST have an idea what you will do if your plan goes awry.

amen!

Well put Maven.

A Maven indeed :)