Tuesday, June 28, 2011


The market rallied this week for a couple of reasons. I did not take any trade this week primarily because it is harder (not impossible) to find good deals in up days, especially when the momentum is pretty strong. Secondly, it is against the trend to go short when the market is going up. The risk/reward ratio is simply not worth it.

Above being said, I've spent two days reading the investment classic-Security Analysis. While the bull market is still intact, we can't forget about what the past had taught us. Even though I, myself, did not experience the crash of 1929-1932, the dot.com bubble and the most recent crisis, it is always a good idea to take precarious approach to protect my investment even in good times.

Today was a good day for me, my portfolio was up 3% in a single day. Looking under the hood, however, I do realize that some of my picks a while ago have proven to be pure mistakes because I did not adhere to the "margin of safety" principle and took some actions based on emotional turbulence instead of sound rationale and attractive risk/reward ratio.

I love Apple's product but  I've lost some money on AAPL simply because I didn't stick to my system. Looking back, I would've made money out of the last two major shakeouts accompanied by hammer candlesticks. Similarly, had I paid more attention to the risk/reward ratio, I wouldn't have bought POZN at the near-term resistance.

Reading Security Analysis really calms me down and makes me rethink some of the positions I've held before or am holding now. I'll keep reading it and come back with some more insights on the value investing side.

No comments:

Post a Comment