Minor Axiom III: Decide in advance what gain you want from a venture, and when you get it, get out.
2 comments:
Anonymous
said...
I guess this is a trader's approach. I just spoke to a friend this evening who is a successful investor, but not a trader. He tells me that once a company passes his "screens", if he buys, it's with the intention of holding indefinitely. He sells as little as possible.
Although I enjoy the axioms, I find one problem with them: there is no distinction between trading and investing. To my mind, there's a big difference.
The distinction between investing (l-t) v. trading (s-t) is time frame. I think that the point is to relate what you want to gain over a particular time frame.
Holding indefinitely? Think of residential real estate in places where commerce has left. I hate to think about the World Com's and Enron's where they passed all of the best screens only to become defunct investments. Think about the industrial boom towns now wastelands. The housing prices declined and likely will never rebound. Staid corporations? Do you know what the average life of event the largest corporations is? I think on average it is less than 70 years.
I'm not pooh-poohing your friend's success. But given that the best analysts only have no better than a 40% success rate, how does your friend determine if he's made a wrong decision? I don't think his style is the difference between trading and investing, but rather, (and I know that this sounds impertinent), it is the difference between having a plan and not having a plan.
2 comments:
I guess this is a trader's approach. I just spoke to a friend this evening who is a successful investor, but not a trader. He tells me that once a company passes his "screens", if he buys, it's with the intention of holding indefinitely. He sells as little as possible.
Although I enjoy the axioms, I find one problem with them: there is no distinction between trading and investing. To my mind, there's a big difference.
The distinction between investing (l-t) v. trading (s-t) is time frame. I think that the point is to relate what you want to gain over a particular time frame.
Holding indefinitely? Think of residential real estate in places where commerce has left. I hate to think about the World Com's and Enron's where they passed all of the best screens only to become defunct investments. Think about the industrial boom towns now wastelands. The housing prices declined and likely will never rebound. Staid corporations? Do you know what the average life of event the largest corporations is? I think on average it is less than 70 years.
I'm not pooh-poohing your friend's success. But given that the best analysts only have no better than a 40% success rate, how does your friend determine if he's made a wrong decision? I don't think his style is the difference between trading and investing, but rather, (and I know that this sounds impertinent), it is the difference between having a plan and not having a plan.
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