The Traders Journal

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Charts I'm Stalking: Action Practice #17

This is all about your fiscal fitness and future financial fate.  Pay attention!

I’ve written before about the indisputable number of academic studies proving asset allocation is the highest leverage activity that individual investors can focus on.  Although this blog will touch upon this, it will be focused instead on the principles of CORE & EXPLORE investing.  Though popularized and championed by Vanguard’s founder John Bogle, its origins actually date back to published research done by Schwab in 2000.

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The Albert Einstein Approach to Stock Market Investing

Albert Einstein famously said, “If I had one hour to save the world, I would spend 55 minutes defining the problem and five minutes implementing the solution.”   If you were in a life threatening situation and had only one hour before it proved fatal, what would you do?   Einstein said he’d spend his time wisely asking probing questions to understand the problem in depth.  Having done that, he’d only need 5 minutes to address the issue. 

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Paul Merriman's Essential Investor Challenge Questions: The Answers by Gatis Roze

At a May 20th presentation to the Seattle chapter of the AAII, Paul Merriman confirmed to me his standing as a respected elder of investment management.  Since selling his multi-billion dollar advisory firm in 2012, he has been running a financial education foundation.  His motto  “knowledge is power” is an accurate portrayal of his mission, and parallels my own efforts to educate and empower individual investors these past 20 years.

What makes Merriman’s motto so unique is that it’s backed up by a depth of experience few have attained and delivered honestly in a philanthropic voice that says “this is what’s best for individual investors.”  My intention here is not to paraphrase his AAII presentation but to highlight two indispensable points he made that day.

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Essential Rules to Share with Your Friends: The Financial Simpletons

I had a shock recently.  I met a couple who was in the midst of what I considered to be a personal financial coronary, yet they were totally oblivious to the perils facing them. Both husband and wife were professionals with advanced graduate degrees. Despite their intelligence and educations, neither of them had ever taken the slightest interest in any kind of financial education or investing. They’d led successful careers, yet they were absolute simpletons when it came to anything financial. For the sake of this analogy, I’ll call them Fred and Wilma — a nod to the Flintstones.  

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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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