Investing 102

[GregWeld]

There's not too much to write home about with this choppy market. Trust me - this is typical summer action. We didn't get the usual "sell in May and go away" - but we are getting the typical summer "death of a 1000 cuts"...

I ALWAYS ALWAYS ALWAYS build a cash position coming into summer. Remember that I use JNK - HYG - NLY as cash parking spots. Years ago it was MSFT - GE - DELL.... but you must change with the market... but I digress...


We're at kind of a weird place in the market these days. People KNOW - without a doubt - that INTEREST RATES ARE GOING TO RISE.... when and how much and more importantly HOW FAST.... that's the unknown.


My typical action is to pick away on the stocks I like -- when they dip a bit. I use LIMIT orders for these buys - setting a price below where the market is at the time I place the order. I don't get stupid -- I just go a penny or two below the current BID not the ASK.... and if it dips to there at some point during the day I get the order filled - if not - it expires (I use day only limit orders).

So if I want to build a position to 10,000 shares... I'll buy 2,000 at a time. But during the summer - I only buy more if it goes below my last buy. So if I paid 20.50.... I'll add more if it goes to 20.35 etc. All I'm trying to do is not go all in at 20.50. Why?? Because it feels better to do it this way -- and I've been doing this for some 30 years... and I fully understand the MENTAL part of the game. I EXPECT --- expectations are meant to get crushed --- the market to be better in the fall -- so by September or October I expect the market to be higher or more steady.

This strategy is for large buys not 50 or 100 share positions... a few dimes on 50 or 100 shares isn't going to affect your return. But this is a strategy to remember and use if you're buying 500 or 1000 share position. It's just a game -- it makes you pay attention -- it makes you understand where your heart and mind are and it teaches you to really get in touch with your investor side. Can you stand to buy when the market sucks.... it's very important to know whether or not you can. Some can't -- it's okay.... but you need to know that. It's like a good poker player -- if you start a bluff -- can you see it through til the other player folds or are you going to toss money in the pot a couple times = and then fold -- thereby just increasing your loss. You should have just folded after the first cards came around... If you're not a good bluffer -- it's okay -- just know it and fold early. It'll save you money. Same thing in the market -- if the market is going south and you start buying and it's just killing you mentally... so you buy more and then at the bottom you fold and sell... THAT'S DUMB! That is what MOST "retail" investors do. They sell at the bottom and buy at the top. DUMB - DUMB - DUMB.... Let's not be "that guy".