It's Not What You Win That Counts
It's What You Don't Lose
We suggest reading the beginner's section and the glossary of terms for starters. There is a lot of information available in these two areas – take advantage of them.
In addition, there are several informative sites accessible by using the outside links located on the front homepage.
We feature three (3) model portfolios. The following overview covers the basic ideology behind the three portfolios and our investment philosophy. The portfolios are:
The conservative portfolio emphasizes safety and risk control. It is for the investor who wants the least amount of risk exposure while still maintaining a solid rate of return. The emphasis is on the return of one’s money, as compared to the return on one’s money.
The moderate portfolio's focus is on both the return of one's investment and the return on investment. Safety is still of prime importance. So too is the preservation of wealth. The goal is larger profit margins as compared to the conservative portfolio.
The aggressive portfolio is for investors who have experience in trading and who know the ropes so to speak. They understand their overall financial situation in detail.
Aggressive investors have made the conscious decision to take on more risk than the average investor does – in order to gain the opportunity to make larger profits.
A well-defined plan is in place to control and manage the risks. Reassessment of the plan is essential so that the portfolio adjusts to changes in the market accordingly. Hence the aggressive portfolio is much more active than the conservative and moderate portfolios.
Money management and asset allocation are two key building blocks of any serious portfolio – be it conservative, moderate, or aggressive. Constant reassessment and adjustment of the portfolios with market changes is key as well.
We use an inverted pyramid to illustrate the structure and foundation of our investment philosophy. At the base of the pyramid are the safest asset classes. They are also the soundest of all available investment vehicles.
Various investment categories sit on top of the foundation forming a hierarchical scale from the safest assets at the bottom – to the riskiest assets at the top.
At the heart of our approach is the recognition of bullish trends. Presently we have three (3) paradigm themes forming the structure of our portfolios. Each theme is the fundamental ideology behind a presently existing primary bullish trend in the marketplace.
All three paradigms are presently the top performing sectors of the market. Going forward these three themes should retain their present long-term primary trends. If any of the long term trends change then we will change the portfolios to readjust accordingly.
We stress the combination of both fundamental and technical analysis in assessing market risk versus reward. Also offered are interventional analysis and contrarian viewpoints.
One of the three model portfolios will offer a suitable investment vehicle depending on one's overall financial situation and goals. We also look at the psychological aspects of investing and how they manifest themselves in one’s investing decisions.
The main difference between the three model portfolios is the allocation of asset classes: both in regards to the types of assets utilized and the individual percentages allocated. Emphasis on money management runs throughout all portfolios.
Psychology
The market thrives on two basic emotions: Fear and Greed
However, there are many subsets to these as well. For instance, one can have the fear that he is going to miss the next rally. Is really fear - or a form of greed?
One can keep holding a stock after significant increases in price, never selling or booking profits, always hoping for additional profits. Suddenly the stock starts falling precipitously. Half of the profits that were on paper vanish.
Did greed keep us from selling or was it the fear of giving up possible gains? The market will teach us much about ourselves if we listen to it. It is hard to listen to the market as opposed to what our mind thinks about the market. This is true in all things. Listening is an art form.
The main reason investors take a big hit is generally due to emotional and psychological reasons. We all have our own unique personality that we bring to the table.
Whatever emotional and psychological weaknesses we have, the market will quickly search them out, and bring them into play – usually quite fast.
Most often then not the market does not have to beat us – we beat ourselves. To be successful we need to know our weaknesses. We should to try to correct our weaknesses as we become aware of them. We must know our strengths – and use them to our advantage.
This is done by first recognizing them and then having a plan to keep them under control – just as we keep the other types of risk under control: market risk, timing risk, currency risk, etc.
Discipline and money management will allow us to cut our losses quickly – and to let our winners run freely. There is nothing wrong with being wrong – only in staying wrong.
The above is a general outline of our investment philosophy. The following points are most important:
Remember the slogan:
It's Not What You Win That Counts
It's What You Don't Lose
Next week we will go over the pyramid in more detail and the three investment paradigms.