I’d describe my nirvana in the stock market as follows – making the most amount of money with the least amount of risk. I’m betting you’d describe this as your nirvana in 2014. What about 2013? How did you trade and invest in 2013. I’ve met a lot of folks this year who have lost most of 2013’s gains in 2014. These investors placed ill-timed bets on stocks that were about to fall out of favor. I’ve met investors who have traded twice their normal position size in order make back lost gains… only to lose twice as much. I’ve also met the investor who places bets and loses on what should happen in market based on “their view” of the economy. Does any of this describe you?
There are ways to combat the above. I’m not lazy about research, stocks or the markets… I am lazy in this regard – I want to make the easy/boring morning. I learned a long time ago that no one standing at a cash register cares how hard I had to stress over a trade when making a purchase. That person takes my money whether I made it in a low-stress manner or had beads of sweat running down my chin for the entire length of the trade. So, how do you learn how to make the “easy” money – keeping in mind that there isn’t anything easy about the markets J
Here is how I research and handle my investments. This level of preparation I believe is why we are successful here at Noram Asset Management. We use the below preparation to invest in stocks, ETFs and to generate weekly income for clients.
•Learn to spot sector and subgroup rotation. This is grunt work, but it pays off. We were able to place clients in energy stocks at the end of March and beginning of April because we was able to spot the sector and subgroup rotation by institutional investors.
•Only invest in the top 2% of the market. The stocks you buy should beat 98% of tradable stocks in areas such as earnings growth, sales growth, revenue growth, return on equity and institutional support. All of these areas should also be accelerating.
•Increase your market situational Awareness. If most stocks are going down the chances or your success in the market are slim. In a downtrend you have a 75% chance of having every stock you buy or own going down. Wait to invest until the trend turns higher.
•Once you find a stock to buy write you game plan down in your trade journal. Don’t have a trade journal? Get one. Write down the proper buy point and buy range. Write down your stop loss price as well as your price targets. Also write down what would keep you in the stock beyond your targets and how you’d then get out. More simply put – have sell rules!!
•Stick to your plan. Be accountable to yourself and execute your well thought out plan. To be successful you’ll need to stop flying by the seat of your pants.
•Debrief your investment when it is over. I learn a ton from my mistakes. If I write down how I mishandled a situation I’m less prone to repeat the mistake.
As for the markets on Wednesday… The market is on shaky ground. The Nasdaq, which once led the markets higher, now is leading us lower. If the ADP employment report is soft coupled with a soft GDP report then look for this downturn to pick up steam. If you add three poorly received quarterly reports from the likes of Twitter, Panera Bread and EBAY then you can make a pretty strong bear case for May and beyond.
Remember, the easiest way to be bearish and defensive is through the use of bonds. The easiest way to invest in bonds is to use the bond ETF TLT.
If you have any questions or would like to join us for our trading / investing open house please email me – Tim.Reazor@NorAmAsset.com
Economic Reports Today:
ADP Employment Report
8:15 AM ET
8:30 AM ET
Employment Cost Index
8:30 AM ET
9:45 AM ET
Petroleum Status Report
FOMC Meeting Announcement
2:00 PM ET
Farm Prices Report
3:00 PM ET
Notable Earnings Reports Today:
Iconix Brand Group ( ICON)
Whiting Petroleum (WLL)
The information presented is for educational and entertainment purposes only. Opinions and information expressed are based upon information considered reliable. However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.