Investing & trading: July - September 2015 articles archive home
Common errors
Adapted from A Dash of Insight, Jeff Miller’s list of frequent investor errors: They try to be traders. They don’t get the mix right. They think they are experts on world events. They confuse politics with investing. They wait too long – usually, for problems to be sorted. They fail to see what’s working.They don’t manage risk effectively. They react to news. They try to go "all in."
Wednesday, September 23, 2015 ... more
Own worst enemy
You’re smart, confident, and always on top of the latest investment news. If something’s hot, you’re buying. If something’s not, you dump it. In 1998 you bought into the listing boom. In 2007 you bought derivatives. In 2011, you bought gold. In each case, buying what was ‘going through the roof’ and afterwards selling after it fell. You can’t resist buying yesterday’s winners, and it’s cost you plenty.
Tuesday, September 22, 2015 ... more
Bad news
One of the most important lessons to be learnt is that it’s totally irrelevant to stock prices whether news is good or bad. Failing to understand this basic tenet causes investors to overreact to the news. To be a successful investor, you need to understand that what matters is whether the news is better or worse than already expected.
Thursday, September 17, 2015 ... more
From the 2013 letter
From Warren Buffet’s 2013 Letter to Berkshire Shareholders:
You don’t need to be an expert in order to achieve satisfactory investment returns. Focus on the future productivity of the asset you are considering. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. Forming macro opinions or listening to the macro or market predictions of others is a waste of time.
Tuesday, September 15, 2015 ... more
Dealing with Black Swans
Go ask your portfolio manager for his definition of "risk," and odds are that it will exclude the possibility of a Black Swan - Nassim Taleb’s outlier that lies outside the realm of regular expectations - despite the obvious evidence of their huge influence.

It’s easy to see that the markets, like life itself, are the cumulative effect of a handful of significant shocks. So why don’t we spend more time trying to predict them?
Tuesday, September 8, 2015 ... more
A few insights from Broker-turned-Boglehead Rick Ferri on stock-market investing: If you consider yourself to be smarter than the next investor due to your social status, education or success in an unrelated career, you have what it takes to be Wall Street’s next victim.
Wednesday, August 26, 2015 ... more
Don't know
Barry Ritholtz at The Big Picture reminds us that the answer to the question “Where’s the Dow going to be in a year?” that is best for television might not be the best one for investors.
Tuesday, August 25, 2015 ... more
Nicolas Darvas’ advice
... for speculating in the market:

“There is a ‘follow-the-leader’ style in the market. Select the strongest industry group and trade its top leader.”

Darvas saw the combination of price and increased volume is the key to stock selection. He used his “box theory” to time his entries (on breaking out to a new higher box) and exits (breaking below the current trading box). For new trades, he used “pilot buys” - starter positions in stocks he liked. Only if a stock moved higher did he increase his position. He learned never to buy more of a losing position. While his trading approach was technical, he understood the relevance of good fundamentals ...
Wednesday, August 12, 2015 ... more
Livermore's insights
Much wisdom has been shared over the years by great speculators and investors. But perhaps none have given us as many insights into the market as Jesse Livermore, the ‘boy plunger’ who made $100 million in 1907 going short when everyone else was bullish and went bankrupt for at least the fourth time in 1934.

“Whenever I have lost money in the stock market,” he said, “I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee. A man has to have experience and he has to pay for it.”
Tuesday, August 4, 2015 ... more
Some traders ignore volume. They say you get paid on price not on volume. But most professionals know that analysing volume provides a deeper understanding of the markets.
Wednesday, July 29, 2015 ... more
Charlie's list
Charlie's Almanac contains a 10 point investing checklist. Here is the short version.
Wednesday, July 22, 2015 ... more
Yield comes from the intersection of income and value. The second aspect, which is equally important, is the sustainability of the dividend. if the company can’t grow it, inflation is going to erode the value of your income.
Tuesday, July 21, 2015 ... more
From the classics
From Henry Clews, Jesse Livermore, Bernard Baruch, Benjamin Graham and Philip Fisher: the need to think for yourself, ignoring tips, insiders and the financial media.
Wednesday, July 8, 2015 ... more
Psychologist Gary Klein develop a method for making better decisions he calls premortems. Whereby you imagine yourself in the future, after the project you're considering has ended in failure.
Thursday, July 2, 2015 ... more
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