Everyday Stock (Re)Investing

[NorthWesterner]

Thanks for the response -- hope we can get some good discussions going here. Invite your friends and neighbors into the pool!

You say you approach stocks differently than I do. What's your approach?

After about 30 years of hit-and-miss, unfocussed, tips-from-friends-and-brokers type investing, I decided to get serious about figuring out what I was doing. (By then I had accumulated enough that it was worth paying attention to instead of playing with). To cut a very long story short, I finally came up with two realizations and a decision.
The realizations:
1. All my research showed that the way to make money in the stock market is to pick a strategy and STICK WITH IT. As long as the strategy is good, and you keep making sure it works, follow it through thick and thin. There are a number of strategies that work. The problem is people aren't consistent, which is where they fall short.
2. Despite the mantra of buy low and sell high, most people do the opposite. They buy when a stock has momentum, when it's being talked about, when it looks like it's climbing to the sky and they don't want to be left behind. Then when, inevitably, it goes down, as all stocks do, they sell it, usually at a loss, because they're afraid of losing even more. A good strategy followed scrupulously is the only thing that will avoid this psychological trap.
The decision: After looking at a lot of strategies (the hokily titled book, "The Best Little Guide to Stock Investing" by Kelly is actually a fantastic book, IMO -- think that's the exact name, if not it's close--lays out in a few pages the philosophy and strategy of many of the major players today, Buffett, Lynch, O'Neill, Fisher, etc.) I settled on the NAIC system as being proven, usable, and effective for long term growth. I started a club (a somewhat different club from the usual; all the members are basically in my position, a fair chunk of $ to invest, knowledge of the markets and investing, but no strategy; we didn't want to diddle around with $25 or $50 a month, so we tossed in meaningful money to keep our attention focussed). We've been at it for about two years now, and so far it's worked both in the up market of the first year (our return was 101%) and the down market (we're still up 38% for the ttm.) That's only two years, of course, but it's both up and down markets, and so far the tools have worked like a champ.

So that's my present approach to stocks. What's yours?

I'll let this message focus just on this topic, and get to BGP next message.