Forum Archive Index - April 2001

[Phaedrus <Phaedrus@techemail.com>]

Mick G,
               Good luck with your studies. Don't count on the sharemarket, 
because unless you are able to change your outlook and approach, your efforts 
in this arena are doomed to failure.
You state "I will not sell at a loss". This is either saying 'I do not make 
mistakes' or 'If I make mistakes, I will not acknowledge them as such, and will 
henceforth refer to them as investments'.  Assuming that your judgement is as 
good as most brokers, about half of your choices would turn out well. So, out 
of 4 initial buys, 2 would turn out well, and be sold sooner or later at a 
profit. The other 2 would be losers, and therefore held, since you never sell 
at a loss. Of the 2 new buys, one would go well, and be sold. The other would 
be held. The next new purchase would be held if it was no good, or sold at a 
profit. Thus in only 8 or 9 transactions, you have self-selected a portfolio of 
4 dogs, and called it investing. It is extremely doubtful that the profits you 
have taken in the past will compensate for the almost guaranteed poor 
performance of a "portfolio" selected in this way. Either way, at this point 
you are effectively out of the game, and not a trader any more.
Contrast this, if you will, with a less ego-driven approach. 'I expect to make 
mistakes. As soon as I recognise them as such, I will sell them before they 
cost me too much money'.  Without going through the above scenario again, it is 
easy to see that this second approach will, in the same 8 or 9 transactions, 
see the selection of a portfolio of stocks with superior performance.
Regardless of the time-frame in which you choose to operate (from day-trading 
through to long term investing) one maxim remains universally true.
Cut your losses, and let your profits run.
                   Phaedrus

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