Sunday, November 4, 2012

Making Money in this Market

Adapted from http://contrarianedge.com/

Three ways to achieve superior long term returns:

Informational Advantage: “better information” usually means insider information and will land you in  jail (In India, it can make you rich!).
 
BUT, I do not do this, therefore, for me, this option is not available.

Analytical advantage: Being able to analyze information better, you can build better models.
 
Technical Analysis helps me to identify trends.
 
Behavioral advantage: Be more rational than average market participant.
 
This is easier said than done. We all think, we are wiser than others. But, are we? Who is to judge?
 
The blog, ContrarianEdge gives three reasons to sell an investment:
 
1. It made you money.
 
2. Things have changed.
 
3. Better Opportunities.
 
An interesting idea is to make adjustments to your investing process, using:
 
Pain Arbitrage: If the stock is expected to do nothing in the next few Quarters, there is pain in holding it. Most Funds will go away. This pain will give gains later. Take the pain now.
 
Diversification: In theory it sounds great, but too many stocks breed indifference. The blog feels that holding 20 to 30 stocks finds the right balance.
 
[My Notes: I would think 20 is too much. My own list will normally be 6 to 8. But, managing a fund probably has different methods. am an individual investor]
 
Opportunistic: DO nothing if there is nothing to buy. Wait for unique opportunities.
 
Focus: There is only so much time in the day. You cannot be an expert in everything. 
     
 
  
 
 

1 comment:

Ssaameer Sunil Limaye said...

Sudarshanbhai,

Above all, your notes are the most useful ones. Thank you for that.

Seeking your blessings,
SsaameerSunilLimaye