Replies to post #13325 on General Stock Ideas

[gfp927z]

Bigworld, Wow, with that much dough coming in, there's no need to take unnecessary risks. Just sock the money away in safe investments, and you'll soon be rich.

The only way to mess things up would be to fritter it away on risky trades and speculation, things like shorting, options, or loading up on one investment or sector. Taking huge risk is for when you are poor and trying to amass the money. Once you have it (as you do), you have the luxury of being conservative.

[gfp927z]

Bigworld, A 100% bearish strategy can only work over relatively short periods of time -





That, combined with the fact that stock markets move higher over time, means that a 100% bearish strategy will only work 1) very infrequently and 2) only if you time it right. So the odds are not favorable.

A better approach, odds-wise, is what Warren Buffett does. Instead of trying to short, he keeps his long positions in place while letting cash build up when he can't find good values in the market. He's been building up cash steadily over the last several years and will deploy it during the next recession or big market drop.

It's a smart strategy since it puts him on the right side of the historical long term uptrend in stocks, and he also benefits during the periodic bear markets by buying stocks at big discounts. The only timing aspect of his strategy is knowing when to build up cash and when to redeploy it, which for Buffett is when he is or isn't able to find compelling values among individual stocks.

It's a great system for the stock side, but for people who need income from their investments (Buffett doesn't), the income can be obtained by stressing higher dividend paying stocks plus some bonds. Add in some real assets like real estate, gold, land, etc, and you've got a bullet proof strategy.

[gfp927z]

Another aspect of investing to consider is the psychological side and the various forms of 'self sabotage' that potentially lurk within each investor. Beyond just making mistakes, some investors subconsciously actually want to lose money due to an underlying psychological issue, as seen in people with gambling and other addictions, a form of 'self sabotage'.

Living near Phila for umpteen years I'm well aware of this phenomenon. Like Cleveland, Phila historically has/had a 'city of losers' syndrome, where people are used to losing, come to expect it, and secretly want to lose.

Also relating to 'self sabotage', it turns out that the children of narcissists are often prone to this phenomenon (narcissism in the parent is due to their lack of self esteem, from which they try to overcompensate). The narcissistic parent belittles their kids, who grow up to have low self esteem and a subconscious desire to lose. If not recognized and corrected, this could lead to big trouble, financial and otherwise.

Doing some self-analysis, I think this was part of my problem when it comes to the stock market. You don't seem to have this type of underlying urge toward 'self sabotage', but instead are prone to being overly bold and confident in your overall outlook, with a reluctance to make adjustments, which can lead to mistakes like doubling down on losing positions, etc.

I figure Warren Buffett has a good strategy to follow. Can't argue with success, and his 'longer view' approach smooths out the emotional side of investing, something I always had trouble with.