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| Thursday, July 05, 2007 |
| Random Thoughts #7 |
Even after lots of analysis, how much control does one actually have over the price movement?
In my opinion, I think once you are loaded into a position, you are at the mercy of market forces. You can pray, you can predict, you can justify your decisions but eventually you are powerless to move the price (Assuming most are retail investors like me). That is why exit strategies are important. I've read in books saying that they are more important than entry strategies and rightfully, I really think that is the case. This is because only when you exit, everything is realized. It can be your losses, or your gains, watever it is, it only matters when you close a position.
Another important aspect is portfolio management. What point is it to have 20 stocks with only 1 of them having 100%? when it will be diluted to 5% gain in portfolio? When you see on papers, those "gurus" advertising their power stocks failed to mention one thing. What is their overall portfolio gain? I could have jolly well bought every single stock and then boast the multi baggers.. haha, then maybe i could be a guru as well. hahaha.
Anyway, since this is random thoughts, I do not really bother about organizing my thoughts. So coming to the point of "gurus". These gurus, invesment gurus, millionaire gurus, all have one thing in common. They say what you want to hear, which is "getting rich the easier way". In fact, the way to get rich is to be a guru and teach.. haha. Anyway sticking to investment gurus. Many of them tell you their astronomical returns, but do they mention about their drawdowns? what are the risk incurred to get this type of returns? Surprisingly, they just fail to mention it. Why? I think its because the general public likes to hear about gains rather than losses. People are focused on returns rather than risks. But one must always save to fight another day. Capital preservation is the most important thing when it comes to investment/trading/betting. Without money, you cant invest. That's the whole point.
Even at this point, while at a 50%+ returns, i never once had the mentality that "i could take more risks since i'm earning more now". I believe that many people who burned their fingers regret that they take too much risk. Leveraging is a magical thing. I'm still learning and you can see from my posts, that i had lots of errors in measuring leveraged risks. But this is something all should look into. As long as you are disciplined in cutting loss (the most painful thing a trader should do), think of this as a long term thing (20+years), you will understand that trading/investing is a lifelong process.Labels: Random thoughts |
posted by Nenix @ 11:46 AM   |
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| NenixDreams Fund |
| Fund launchprice on 1st August 2006= $1
Target for 2007 = Beat STI index
Current price of NDF as of 1st Oct 2007 = $1.58
Current price of STI as of 1st Oct 2007 = $1.54
Difference with STI index is 0.04
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