atans1

Latest US investment philosophy

In Financial competency on 14/11/2014 at 2:58 pm

“Buy & hold” is history. “Trading” is in. Locals (before FTs took over SGX and made contra trading even more difficult) and Hongkies have been doing this since time immemorial.

The new investors’ philosophy seems to be, rather than pay a financial adviser to let their stocks languish in a buy-and-hold paralysis as the market falls, a potentially more profitable move is to pay advisers to protect and increase a portfolio’s bottom line by actively trading.

A perfect example of the vulnerability of the buy-and-hold strategy is the technology stock boom followed by the tech stock bust. Tech stocks in general soared in price during the bull market of the late 1990s. Sun Microsystems whihc is now owned by Oracle Corporation (Nasdaq:ORCL), made software and Internet hardware for a burgeoning World Wide Web. All indicators, technical and fundamental both, pointed toward continued growth and profitability of the company.

Yet despite Sun Microsystems’ bright prospects, other tech firms were moving up fast to challenge Sun Micro’s market dominance. The stock fell in the face of competition from IBM (NYSE:IBM) and Hewlett Packard (NYSE:HPQ), and other tech competitors and its price has declined some 85% since its high. Obviously, Buy-And-Hold would not have worked in this instance, and there are numerous other examples of once-high-flying equities which have fallen on hard times and low stock prices.

ST’s writer suggests a trading tactic any investor, who is confronted with a dilemma over taking profit on his winning bet or cutting loss on a plunging stock, is to sell half of it.

Selling half of the investment will release the psychological logjam that comes from trying to decide whether to keep the investment or get rid of it completely. He can then analyse why he bought the stock in the first place, and whether to hold the remaining shares, sell them or buy more.

This ploy is especially useful to a trader who is facing losses on his bets. What should he do if he keeps losing money even though he believes he is right and that the market would see sense eventually?

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid=835928295-20153-5633595585

Related post: https://atans1.wordpress.com/2012/09/04/long-term-investor-while-trading-a-stock/

http://www.investopedia.com/financial-edge/0611/why-buffetts-buy-and-hold-strategy-is-losing-its-appeal.aspx?utm_source=coattail-buffett&utm_medium=Email&utm_campaign=WBW-5/22/2014

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  1. it seems there is no more update in IMSavvy of CPF webpage.

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