Thank you for sharing your investment strategies. I read the FAQ top to bottom and outlined the important points to me in my personal investing workbook, I have a lot of additional homework ahead of me. I collected the following questions as there were gaps in explanations on certain points. The following list represents 16 questions. I think it’s a significant number, probably an unreasonable amount to expect to be answered, so I appreciate any response received.
Hi JC, I publish the knowledgebase so as to not have to answer the same questions every time a new person joins the board. However, I’ll try to answer your questions briefly. Please remember there is nothing sacred about what I do. It’s just what I do!
I know the following are not hard and fast rules, but guidelines. You mention position sizes (oversized/medium/average) around 4.5%, with the number of stocks you average, those being around 20. That would make sense. 20/100%=5%. So a full (average) position would be 5%, (medium) half 2.5%, quarter 1.25%?
It simply depends on how many stocks I have in my portfolio. Right now an oversized position is about 16%, a full position is about 7.5% , and a small position is from tiny to maybe 4%.
What do you use for a news-feed application?
Seeking Alpha and Schwab.
What is your position on gold and real estate as a way to diversify your portfolio? Having your entire net worth 100% in stocks seems risky to me.
I never use them. I certainly see them as a lot more risky than stocks. If there is an emergency reason to sell, I can be out of a stock in 30 seconds. If there is an emergency reason to sell real estate, it can take three years and you can be wiped out. Sorry! I had a friend who was flipping real estate in the 1980’s when real estate was booming in Texas. He was a physician and his wife was a successful lawyer. They put all their savings into it and would buy with 20% down or so, sell in six months and make 50% to 100%. They were in their 40’s and figured that in six months they’d be able to retire. The music stopped! They saw what was happening, but there were NO buyers. They couldn’t get out. Over six months the prices dropped 40%. They were wiped out and more. They were still working in their 60’s. I had a French friend who felt he could no longer take care of his huge house and grounds. He bought a townhouse, and was ready to put his big house on the market. This was in Aug-Sept 2008. I told him “Jean, cut your price by 25% and sell immediately.” He was anchored to the price it had been worth. “No, it’s worth XXX euros!” It took him three years to sell the house. Three years of upkeep and double mortgage payments, and he sold it at 40% off his original asking price. I don’t invest in things that aren’t liquid! I see no reason to invest in gold.
Regarding mining/drilling/natural resource stocks and their boom/bust cycle, why not buy on the down cycle?
It’s not the way I invest.
Why do you not invest in options or bonds?
I’ve explained it many times. I know that my feelings on bonds are clearly spelled out in the Investment Primer chapter in the Knowledgebase. If you want to use them, go ahead. They are not for me.
Why are you 100% invested in stocks and have no dry powder to take advantage of major events such as the pending Greece default? You appear to think that timing the market is or nearly impossible so don’t even try. This is counter to MF recommendations around keeping some dry powder.
I’m not part of the MF staff.
How often do you re-evaluate your investments?
Constantly.
How do you determine if a PE is reasonable? You have mentioned 20x. Why is 20x the magic number?
It’s not magic, just a comfortable number. I actually look for a PE that is substantially less than the rate of growth of earnings. (Read about 1YPEG for more info.
You mention Rule Breakers a lot in your posts. Would you recommend subscribing to the RB service?
I subscribe, but I certainly don’t buy all their recommendations.
Do you use stops with your positions?
Never
If you can average 30-35% a year why are you not managing OPM and skimming?
What’s OPM?
How many hours a month do you spend managing your portfolio?
Lots. It’s what my family has lived on for almost twenty years.
What is your opinion of technical analysis?
I never use it, but some people swear on it.
Hope this helps.
Saul
For Knowledgebase for this board
please go to Post #9286