Friday, May 23, 2014

Random thoughts: Curbing my traders instinct

My mind is in a state of flux.

I have researched Venture deeper, I will share my research soon. I really like to get it. But I keep persuading myself not to. I know we cannot timed the market. We should just buy a good company that is fairly valued with some margins of safety, regardless of the state of the market. A good company could buck the general market if the earnings are good. But I felt a meaningful correction is really overdue. US market is breaking historical records. Can stocks defied gravity? Also, I am starting to smell greed in the market. My own. Look at the forums and blogger sphere, I saw many new members, many pleased with their recent winning purchases. Nothing wrong with that, but many are either keeping away from analysis deliberately, or just shouting how great a company is. And again, people are lamenting about missing the boats, "can still buy?" etc. 

I am aware market can stay irrational longer than you stay solvent, I think the reverse is true, the market can defied gravity longer than you can endure and fall into the trap too.

How to keep my itchy fingers away? I think the few remainders work better in drowning out the chorus of "buy, buy, buy" in my head.

1) Cash is King. I am not actually holding a lot of cash. In fact, I am 80% vested. My emergency fund is not that big. A new mouth to feed, if any, would most probably eat into that.

2) I have not come out with a longer money plan that is ready for bull-bear-bull, or bear-bull-bear. I am not taking the dollar-average approach. Mathematically, if Market clash by half, your 1 dollar can buy 2 dollars of shares for 2 years, but you could be paying $1 for $1 for 2-3 years or even $1 for $1.5 for a few years too. Mathematically, if the subsequent bull do not return with a vengeance and hit a higher high (The last decade high is not breach yet) , your profits might be meagre in the longer run.

3) Market is due for a correction soon. Out of the several world cups in recent years, only 1 did not come with a period of consolidation, are we are at a market high going into July. The problem is, while I can convince myself that market will correct soon, Venture might not show price weakness.

4) There are other options, hold cash and build it up to 2017-2018, 10th year of bull run.

I am timing the market, yes. I no longer consider myself a value-investor. I think I am more a FA trader. 

 

4 comments:

  1. silly investor,

    I like reading the mind gymnastics we go through in different phases of our journey,


    Love the honesty to your own self!

    Not everyday we hear about a "value investor" converting to the other side of FA trading!


    Impressive! You even researched the effect of World Cup on the markets. Now, is this TA or FA? Who cares?

    More important is the courage to act from our convictions!

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  2. Nice thought about the upcoming potential meltdown. Let's continue to build our war chest and plunge in only when the time is right ;-)

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  3. Haha SMOL,

    I remember my brother KBKP during the last World Cup that the stocks are all falling, and volume is low. I told him its World Cup effect. He laughed at me, angry!! Hahaha

    Then I read on papers, only 1 out of the last 6 world cups had a raise in market

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  4. Hi Richard,

    I only think a correction is due, not sure about a meltdown. Given I am 80% vested, I wouldn't want a meltdown too.

    Personally, if I can be a fraud fortune teller, I would think 2014 will be generally flat, 2015 will be better, 2016 will be euphoric and 2017 will caught everyone with pants down.

    But corrections along the year of bull is common.

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