Investment markets got you down, Bunkie? Been blown away by derivative stun guns? When will portfolio market values move back to 2007 levels— and then what will you do about it?
I’m not a professional stock investor either. I admit neither I have the time nor the patience to go through every financial report, visit the companies I’m interested in buying and whatever else it takes to be really confident enough to put a huge chunk of my hard-earned money into the stock. So I have to invest defensively. I aim to minimise my losses while riding the general upward trend of the stock market, rather than maximising my gains on the individual hot stocks. It may limit my gains a little, but in the event of a crash, I hope to come out relatively intact. I basically expect a crash, even in the longest bull run ever. It’s like having a Plan B even though you hope you never have to use it, or buying insurance though you don’t really want to die or get a critical illness just to make the most of it.
Is it luck or skill that gets us to the goals and objectives we set for ourselves— gimmicks and software programs or practice and understanding? How many golfers are still using the putter they started with decades ago at a nine-hole cow pasture? How many of you are still bouncing between investment gurus and hedges in your search for the investment holy grail?
Expectedly, after the resounding victory by the Congress Party in the general elections, markets skyrocketed as soon as the opening bell was sounded; eyeing a windfall in terms of government spending in a host of sectors to pump-prime the econom
If you look at a long-term chart of the Dow Jones average, you will see that it is currently at some of the 2002-2003 levels. It has dropped dramatically since the financial collapse of 2008-2009, but it is still in familiar territory.
The Working Capital Model (WCM) looks at investment performance differently, less emotionally, and without a whole lot of concern for short-term market value movements. Market value performance evaluation techniques are only used to analyze peak-to-peak market cycle movements over significant time periods.
Annually, quarterly, even monthly, investors scrutinize their performance, formulate coulda’s and shoulda’s, and determine what new gimmick to try during the next evaluation period.
Both gold and dollars are considered money, and holding money does not qualify as an investment. However, there is one big difference between the two. By holding paper money one loses purchasing power. The purchasing power of commodity money, e.g., gold, however, goes up if the government devalues the underlying currency.
Risk is the probability of loss. It is best to estimate it and to adjust your purchase and sell strategies to it in order to control loss before the purchase is made. Correct timing of purchases, buying near support, limiting loss potential, and stopping the decline by using volatility stop losses are all ingredients of a good risk control system. Let’s look at a few of these loss control discipline components.
The year 2008 has entered the record books for all of the wrong reasons; the Dow Jones had its worst year ever! So what about 2009, how will stock markets from around the world perform and which are the stocks to follow?