Market Timing is way too complicated and no fun. Investing should be entertaining, not just about money. Whether you are buying a house and fixing it up, raising kids, starting a company, or owning shares, if it interests you then you are guaranteed a return on entertainment (ROE), even if you don't get an ROI.
It also means you get to know your investments over time and can be smarter than the market who doesn't know the investment. (I'm smarter about kids than I've ever been!)
My current strategy is to invest in known brands that fluctuate. I buy when they are artificially low (usually because of something in the news), and I know they can go up. I sell somewhere on the way up when I make 35% or more. I don't worry about short or long term. I don't try to get greedy and make more than 50% (anymore.)
I only invest in companies that I continuously read about and preferably experience their products as a consumer. This has worked for me with Intuit, Apple, ETrade, and Dell. I hope it is going to work with Microsoft and Home Depot. It did not work very well with 3COM who just melted down. I got out when the bad news stayed bad. I did not lose much because I only try to buy low.
What I'm banking on is that these stocks have more volatility because they are well known brands who create a lot of news which the media overhypes (in both directions.) Because so many consumers are directly investing now the market is more easily influenced by the hype.
"I can't figure out what is going on with the market," one of our board of directors told us in a meeting. "Prices go up and down when it doesn't make sense."
I'm banking on that, and so far it has worked pretty well.
Posted by Jeb at May 28, 2003 05:43 PMI do that with individual stocks. I do the same thing but I'm less greedy, wanting only 20% instead of 35%. I made 20% recently on Home Depot, so I'm out of that. I bought Oracle because all our big databases at work were Oracle. And it went down 20% so I bought more. Then it went down 20% again and I bought more. Then it went up 20% so I sold some, etc. I still have the original 100 shares that need to go up to 21.5 to make 20% (at 13 now), but in the meantime I've made 20% 5 times buying as low as 7. If I had tried for 35% I don't know that I would have been able to cycle through as much (maybe, it's been a wild ride).
Still waiting on Boeing (saw a neat PBS documentary on them), Sony (have lots of their products and their stock went way down), Honda (I've owned 6 vehicles, all Hondas), Coke (used to drink a couple every day and I like the Atlanta connection), and Microsoft (which I've laddered like Oracle, but not as many cycles).
The 100-day moving average, though, could work well for mutual funds and that's what Merriman recommends. Individual stocks are just too volatile (I ran some graphs on my stocks and it didn't look like it would be effective).
Though keeping track of a 100-day average seems complicated, all you really have to do is watch that graph every day and it will tell you whether to hold or not. I think that's fairly entertaining in itself just to see if it really works; anyone could do it. And it keeps your interest because you need to do it every day. The best thing is it takes greed, doubt, and emotion out of the equation (which is part of the fun part too I guess).
Posted by: Ted at May 29, 2003 10:36 AMP.S. The fund I'm doing the timing with was a retirement fund that was just sitting there anyway. So it wasn't much fun in the first place.
Posted by: Ted at May 29, 2003 01:00 PM