Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Portfolio Investment Management Strategy- Put More Smart Cash In Your Future

Portfolio / Learning to Invest Dec 03, 2008 - 11:51 AM GMT

By: Steve_Selengut

Portfolio

Best Financial Markets Analysis ArticleThe stock market is a dynamic place where investors can consistently make reasonable returns on their capital if they comply with the basic principles of the endeavor and if they don't measure their progress too frequently against irrelevant indices.

The income securities market is most often a less dynamic place where investors can consistently make reasonable returns on their capital if they understand the basic principles of the endeavor and if they focus steadfastly on the income produced by their holdings.


Securities markets are truly fascinating--- replete with promise, mystery, and unscripted daily drama. But individual investors are even more interesting. We've become media driven creatures that must have reasons, predictability, blame, scapegoats, instant gratification, and an imaginary sprite called certainty.

We are becoming a culture of hindsightful speculators, attempting to replace the raw beauty of unpredictable market and economic cycles with an upward only mythology superimposed on a vast casino-like landscape. Most would-be investors are simply keyboard-skilled gamblers, impatient, lazy, and unfamiliar with the nature of the securities they bet upon--- in either direction.

Wall Street provides chips, tables, odds, croupiers, and atmosphere. There are no controls on speculation, and (obviously) no oversight to prevent product creativity from undermining the very foundations of capitalism. Big brother picks up the pieces and imposes more controls and safeguards on the innocent--- while we re-elect the guilty.

Yet the beacons of simplicity burn brightly at the end of the always-under-construction tunnel between The Battery and Capital Hill. If investors could focus on them (unemotionally) through a cycle or two, the sanctity of stocks and bonds would be re-affirmed and the rationale for derivative drug abuse all but eliminated.

The classic investment strategy that worked so well prior to the development of the multi-level derivatives is so simple, and so trite, that it just begs to be ignored. B-o-r-i-n-g! Surely, the investment Holy Grail will never be found by individual issue buyers and coupon clippers.

Investors willing to identify the realities of our wonderful marketplaces, to recognize and embrace the opportunities with an understanding that goes beyond media hype and blog threads, will survive and prosper. They just need to look back, to rediscover the principles of investment success that can shelter their futures--- but without futures.

The Investor's Creed is a pillar of the Working Capital Model, an investment management methodology developed over three decades ago. It synthesizes basic asset allocation principles, an IGVSI trading strategy, and market psychology into five principles of portfolio operation that transcend market cycles, administrations, and global temperature changes.

Remember, this is a summary and it should raise questions--- limited explanation is provided:

One: "My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation." There must always be a "planned asset allocation" using cost basis instead of market value for calculations. Always be looking for buying opportunities that meet your quality, diversification, and income (QDI) standards.

Two: "Every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately." It is important that a profit-taking target is assigned to every security; it is essential that you pull the trigger when or before the target is achieved. The words "I do not need the income" cannot be thought, much less uttered.

Three: "I am happy when my smart-cash position is nearly 0% because all of my money is then working as hard as it possibly can to meet my objectives." Smart Cash is compounding capital, created by portfolio dividends, interest, and profits. If it remains uninvested while new investment opportunities exist, it loses IQ points rapidly. Long corrections can make you too happy.

Four: "I am ecstatic when my smart cash position approaches 100% because that means I've sold everything at a profit, and---" This condition should occur whenever there is a serious rally going on in IGVSI equities and you have no income asset allocation in the portfolio. In that case, it's a good time to re-assess your asset allocation plan.

Five: "--- that I am in a position to take advantage of any new investment opportunities (that fit my guidelines) as soon as I become aware of them." Unless the equity market is at an all time high level, it is likely that there are new buying opportunities out there. But never relax your QDI standards, or rush into overpriced securities.

Simply put, The Investor's Creed portfolio management plan keeps you buying investment grade securities when prices are low, and selling them at a relatively easy to achieve profit-taking target. Investment grade companies are most likely to survive major financial havoc, are generally in the forefront of cyclical advances, and are always kind enough to provide regular cash flow for portfolio building or grocery shopping.

If you've ever turned an unrealized gain into a realized loss, if you've ever sold mutual fund shares to deal with monthly expenses, if you've ever been unable to take advantage of low prices for lack of income, this is an approach you need to consider. It won't work without well thought out QDI rules and a disciplined mouse.

Can anyone tell me why this approach is difficult with conventional mutual funds?

By Steve Selengut
800-245-0494
http://www.sancoservices.com
http://www.investmentmanagemen tbooks.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.

Steve Selengut Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in