The Traders Journal

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Charts I'm Stalking: Action Practice #16

So you’ve heard about Exchange Traded Funds (ETFs).  You’ve heard that they are cheap. You’ve heard that mutual fund managers cannot outperform ETFs. You’ve decided that a chunk of your nest egg should be in Healthcare. A friend suggested XPH because it holds stocks like Eli Lilly, Merck and Johnson & Johnson — companies  you’ve heard of. Buy, Buy, Buy!!  Whoa — slow down, partner.

Action Practice #15 was about exactly this scenario. I presented you with six options from which to choose. Yes, these six are all Healthcare ETFs, but a closer examination will point out that they are vastly different creatures.

The six candidates were XLV, IXJ, IYH, XBI, XPH and VHT. There are infinite ways to research these ETFs.  Here’s the step-by-step process that I suggest.

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My 3-Prong Recipe for the Safe Growth & Outperformance of Your Portfolio

There is a seismic generational displacement happening in the investment landscape. Many investors are shifting their assets into indexes and ETFs as they move away from stocks and mutual funds. Due to this shift, a number of investment firms are having to make enormous changes themselves in order to remain relevant and profitable.

I maintain that these investors’ misplaced beliefs that individual investors cannot outperform indexes and that active managers are incapable of outperforming passive managers (after fees) will cost these investors dearly in the long run. Let me label it for what it is. This new mantra for lazy investing by lethargic investors will produce meek unassuming gains in the 6-8% range over the long term.  

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This Investor's 5 Personal Passages

I’d like to paraphrase a fishing analogy.  Show someone how to invest by following a winning trading methodology and he/she will be happy for awhile.  Teach someone how to think effectively about trading and he/she will be profitable for a lifetime. 

All too often as investors, our focus is on indicators, price action and our interpretation of fundamentals.  We enter our trades based on data, but if we see our position move against us and we lose money, what then?  We go back and review our system.  The missing link here is that we must figure out ourselves before we can trade competently.  Lack of that will destroy any trading system.  A true understanding of your personal motivations is more essential than any indicator.

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Where My Best Investments & Trades Came From These Past 25 Years Part 1

Approximately every five years, I dig into my Trading Journal with the specific mandate to unearth and review where I’ve earned my profits and losses.  This is not a small project.  I do it on an ongoing basis with all individual trades, but when taken in the 5-year aggregate, the insights are more profound.  

I breakdown my trades into four groups:

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Charts I'm Stalking: Action Practice #15

When you revisit the Action Practice #14 blog, you’ll recall that I presented four equities chosen from Investor Business Daily’s 20 top-rated Big Cap stocks.  (April 5, 2017 edition.) I asked you to choose the best equity from the following four: Western Digital (WDC), KLA-Tencor (KLAC), Priceline (PCLN), and Facebook (FB).  

I have my own money in Facebook. I’ll step you precisely through my reasoning which is described in more detail on pages 56 — 60 of our book. 
https://store.stockcharts.com/collections/beginner-resources/products/tensile-trading-1

 

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Tensile Trading ChartPack Update (2017-Q1) Updated Charts and the Latest Fidelity Moves

Anywhere you see excellence and mastery happening, you’ll discover the same set of recurring universal truths.  Great athletes achieve excellence and make it look effortless. Great investors make market mastery seem natural and make profits look easy.

I love the line “I worked all my life to become an overnight success.”  For me, this embodies the foundation of excellence and the cornerstone of mastery. It’s all about preparation, discipline and organization.  When that all comes together, it’s magical. Stock market mastery demands that investors weave together a string of powerful habits, profitable methodologies and reproducible routines.  It is these all-important routines that allow you to muzzle the bumper car beasts of bad behavior.  

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How I Deal With Investment Losses (And How Not To)

Financial investment losses are the markets’ way of telling you to make adjustments and to correct your present course of action.  The parallels between how American investors deal with financial pain and how individuals deal with physical pain is illuminating.

 

According to a recent article in Consumer Reports, 80% of Americans experience persistent pain of some type and spend over $300 Billion on treatments, drugs and care.  All too often, their solution is to throw opiates, such as Percocet or Vicodin, at the problem.  This mentality has obviously caused an explosive drug epidemic instead of a hoped-for cure.

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Charts I'm Stalking: Action Practice #14

My intent with this Action Practice is not to wax on about the importance of understanding what the markets’ current preferences are.  My point is simply that if the markets are favoring growth over value, then as investors, our probabilities are enhanced when we invest with the growth winds at our backs.  If the markets are favoring large cap equities over mid-caps and small caps, our probabilities are likewise enhanced with the large cap winds at our backs.  

Please refer to the six charts that I presented to you in the Action Practice #13 blog

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35 Years and 5 Key Personal Investment Passages

I stumbled into a gift shop full of tchotchkes today.  It was one of those retailers with endless trinkets and specialty items that encourage you to revisit your youth and marvel at someone else’s creativity.  I became fascinated by one of those intricately detailed Russian “Matryoshka” – the wooden nesting dolls of decreasing size placed one inside another.  Perhaps because the markets were particularly challenging today, I found myself getting pensive about the parallels of my life as an investor to my unbundling of these nesting dolls.  I’ve always felt that investing is like peeling back the layers of an onion one-by-one, and therein lays the parallel.  I realize that like all other investors, my journey has followed the path of the 5 enlightenments as I peeled back my personal investment onion over the years. 

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Charts I'm Stalking: Action Practice #13

For those readers who embrace my CORE and EXPLORE approach (this is actually my version of John Bogle’s approach) with respect to Asset Allocation, you can see why I suggest considering  country funds for a small percentage of your EXPLORE portfolio.  Country funds fulfill the cardinal rule of diversification as their correlations to the USA markets are much lower.  Over the past 30 years, the world’s top performing market has come from this group 100% of the time (outside the USA).  

I personally believe that actively trading a few focused equities in one’s country fund global asset basket can provide the equity growth you seek and can improve your skill in investing in less volatile asset classes within your portfolio.  Make no mistake about what I’m saying. This asset class is for active traders who have the discipline to keep a close eye on these volatile equities, with the additional caveat that it should represent only a small percentage of your total EXPLORE portfolio.

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