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AMR
27-07-2007, 01:23 PM
While operating a buy-and-hold strategy, how do you cope with your shares dropping in value? Having only started buying shares recently I'm finding myself drawn to checking the stocks (and these boards) every couple of hours to see whether they've recovered.

Halebop
27-07-2007, 02:16 PM
Google vicodin and valium. Suggest the other "v" of viagra would be a prescription error.

...operating a buy and hold strategy and checking in on the market every couple of hours is probably asking for trouble. I'm not sure I'd resist the urge to tinker. In my case, I trade over short to medium term time frames (days to years) and invest for long term although I haven't done much of the later in the last few years. Having something to do can be my downfall so I decided to actively trade a (usually) small percentage of my portfolio in order to destract me from doing something dumb with the lions share.

Funny thing is that when I'm away from the market for any length of time (as a participant or a spectator) I don't really miss it.

mothership
27-07-2007, 03:02 PM
I am sure there is a syndrome for those of us who obsessively watch the stocks and the boards - I suspect the solution is getting a life ;)
disc: waste way too much time on forums and watching stocks, but anything is better than housework[xx(]

Lizard
27-07-2007, 05:21 PM
Keep some cash handy. That way I can salivate over the bargain prices emerging and spend the time drawing up downside price targets and deciding which way to spread my cash.

If I get caught with insufficient cash going into a downturn, I usually pick a couple of victim stocks to sacrifice as soon as the action becomes apparent. (Bearing in mind that I typically hold 30+ stocks at any time).

shasta
27-07-2007, 06:51 PM
Shares dropping in value?

In a raging bull resource market over the ditch , with the $NZ/AUS over 90 cents on the exchange?

Where have you been?

If you find yourself having to watch the market with that level of anxiousness, then perhaps you should be paper trading until you feel more confident.

If/when the market turns bear there will be more days like today where companies will fall for no fundamental reason other than the market in general.

There is alot of good advice on Sharetrader - so do avail yourself to the best "free" source of info around, especially the investment thread.

Good luck

Phaedrus
28-07-2007, 09:38 AM
How do you cope with your shares dropping in value While operating a buy-and-hold strategy?

There are many tried and true methods. You can see them all being demonstrated right here on ST.

(1) Tell yourself lies such as "I haven't made any loss until I sell". (No selling = no loss. Neat!)
(2) Affirm to yourself and others that you are a longterm investor in for the long haul. Market fluctuations do not concern you at all. In fact, you are not even interested in discussing such trivia.
(3) Rework all the fundamental calculations on which you based your stock selections. You will find that they will look better than ever as the market weakens. See this as vindication of your choices. If you thought they were worth buying before, they now represent even better value.
(4) Convince yourself that "Mr Market" is a manic-depressive fool. You are right and the market is wrong. Without question. This is a very important point and it is imperative that you have total confidence in your abilities. You must be convinced that there is no chance whatsoever that you got it wrong. This is no time for self doubt.
(5) Ask yourself "What would Buffett do?" It's irrelevant and you don't know, but ask anyway!
(6) Buy more. See the general market weakness as a wonderful opportunity to "Top-up" your holdings. This is a good word to use because it avoids the negative connotations of "averaging down". Pretend that you actually like it when these things happen. Be brave when others are fearful and show your confidence by buying more.
(7) Concentrate on dividends. These are real money while capital losses are illusory. As the market weakens, continually recalculate the dividend yield of the stocks you are holding. It is very gratifying to see these figures rising so nicely. Think of yourself as being cool, calculated and reasonable. Refer to worriers as "headless chickens". You will know that you have become a mature exponent of this approach when you can say something like "I don't care what the SP drops to so long as they keep paying the dividends."
(8) Think of all the brokerage you would have to pay if you were to ever sell any of your stocks. Concentrate on minimising this sort of unnecessary expense.
(9) Remind yourself frequently that you are an investor and NOT a trader. Traders are undisciplined rabble and beneath contempt. Remember, there is no middle path. This is an important point - you must choose one or the other. There can be no compromise here.
(10) Think about the possibility of your being assessed as a trader by the IRD. Think about the horror of having to pay tax on your capital gains. You don't want these things to happen - right? The only way to safeguard yourself is to never sell anything. Ever. Keep telling yourself you are a longterm investor with a buy and hold strategy. This must become your mantra. Use it to drown out any negative thoughts.

It is easy and profitable to be a "buy and hold" advocate when stocks are going up nicely. Unfortunately there are times when it is difficult and unprofitable. To resolutely hold in the face of a falling market takes a certain type of person. Maybe, just maybe, you are not one of them. This is nothing to be ashamed of. You are not alone.

Lizard
28-07-2007, 10:08 AM
While I enjoy your ironic humour Phaedrus, it would seem to me that a person who is struggling to handle their emotional reactions while operating a buy and hold strategy is going to suffer 10 times more under a shorter term method.

Trading correctly relies on being able to follow a good trading plan with discipline and not being diverted by fear and greed. Getting to that point would seem to require some years of experience to enable the plan to be proven and trusted. In the meantime, each trade carries a burden of doubt. More trades -> more doubt -> less constructive decision-making -> more losses -> more doubt....

duncan macgregor
28-07-2007, 10:57 AM
PHAEDRUS, Before you rubbish what others may or may not have done, come out with what you did then we might compare. I myself am sitting out the market with my trading account waiting on the bargains. Just finished a reshuffle of my investor account to a wider safer range of companies. We cant all sell if the stop loss gets hit, who would buy if we all had similar systems. I am seriously thinking of being a full time trader myself, giving up the idea of having an investor account for reasons you mentioned. You keep your cards pretty close to your chest, come out and say what you do at the time, not jump in after the event to bark at the sheep. Why is it you never disclose any companies you hold like poor old SNOOPY for instance the one guy that should keep quiet about his companies. It takes all types to make a world thank god for those buy and hold investors we really depend on them when we sell at the top. Macdunk

SEC
29-07-2007, 03:08 PM
quote:Originally posted by Halebop

Funny thing is that when I'm away from the market for any length of time (as a participant or a spectator) I don't really miss it.


Same here. Although it helps if you're sitting on several stocks that have gained 200+% so even a major correction doesn't significantly affect your gains. But to get a portfolio like that generally takes years. The bigger the gains, the less I worry. I was recently away for several weeks in Europe and may have looked at my portfolio once a week during that time. I needn't have bothered, the portfolio went up anyway.

When I was a novice I exhibited the same behaviour as Mr XXXX, watching those small gains obtained over a few months disappear in a week. The only cure for that is MORE TIME IN THE MARKET.

SEC

living2
29-07-2007, 05:06 PM
UNCERTAINTY= OPORTUNITY if you can prepare your portfolio for it:Disclaimer:have held GPG since it was first floated and topped up during any weakness.There are many posters who are now indicating GPG would be now sold out of their portfolio.Maybe they are right /wrong only time will tell.Looking back an initial investment in GPG is now over 10 times initial investment,since 2001 up only 2 1/2 times.This is my example how time in the market helps if you can pick a stock that is going to be around for the long term without having to worry if your investment is going to go down the gurgler.

ratkin
29-07-2007, 05:52 PM
Long term investing is boring but profitable , the best companies are often those least talked about on these forums. Dont make the mistake of checking the prices , buy quality stocks and only sell if the company you invested in looks like going downhill. Forget the short term price moves , if the company is good then the value will eventually flow through.

You can decrease risk by buying gradually so that you lessen the risks of buying all at the top of the market. Put a percentage of your money into listed funds such as kingfisher and other listed funds , this increases your diversification.
Aim to hold your stocks for years and you will not go far wrong , dont be shaken out by market weakness and while it ok to read the forums remember they are dominated by short term thinking.
As lizard says if you train your mind to see corrections as a good thing you will do well , a good chance to pick up some bargains , this will take your mind away from being negative.

Remember these corrections are the time to buy not sell

Phaedrus
29-07-2007, 09:17 PM
Xxamr_corpxx has no exit strategy. His plan is to "Buy and Hold Regardless". He knows, therefore, that no matter how far or how fast his chosen stocks fall, he is going with them - all the way. No wonder he is worried! I would be very worried too if I were in his shoes.

We don't know what stocks XX is holding, but for the sake of argument let's assume he holds FBU. Now, FBU fell by over 3% on Friday and has fallen nearly 6% in the last couple of months. Should XX be worried at this drop in value? NO! Why not? Because FBU is still in a longterm uptrend.

Compare XX's situation with that of a longterm investor with a plan - to hold FBU so long as it was in an uptrend. To monitor the uptrend they might use simple indicators such as a trendline, a moving average or a trailing stop. They would sell when/if their chosen indicator(s) say so. They have an an exit strategy. XX is worrying himself sick over his short-term FBU losses, but a simple chart would show him that FBU is still well clear of all such indicators, and in fact doesn't even need to be monitored at all closely at this point. XX need only take a quick look once a week or even once a month to confirm that the uptrend was still intact and that price action was still clear of his chosen indicators. He would be able to see that drops of up to 25% are quite normal for FBU and that those of 6% are simply too small to worry about. He would be able to see that he must be prepared, in fact, to "tough out" drops of over four times that magnitude if he wants to stay with FBU and its 7 year ongoing uptrend. He has a system that will keep him in FBU so long as it is in an uptrend and he has a system that will get him out of FBU when/if the uptrend weakens or ends. No matter what happens, no new decisions are called for, and he has no need to worry - and no need to constantly monitor his position.

ratkin
30-07-2007, 04:54 AM
Give it a rest for heavens sake.

He dosent need an exit strategy based on charts, hes a long term investor who should be adding to his holdings on a regular basis, hes not a trader, traders need price related exit strategies long term buy and hold investors dont. He justs needs a large basket of good quality stocks which are added to on a regular basis.

We all know you dont agree with this , you point it out several times a day for years on end, trading has its merits as does buy and hold, they are two different beasts , most of us realise this , you on the other hand seem determined to convert the rest of the investment community to "your way"

No doubt we will now be treated to a host of historical charts pointing out why "your way" is the only way .

Hommel
30-07-2007, 08:25 AM
May be a good week to top up on those long term holds....

living2
30-07-2007, 11:03 AM
Tiss indeed an oportunity but was hoping for my target shares to drop more than they have!!Not as large a drop as I hoped!Are they going to drop further?Waiting in anticipation!!!

Mick100
30-07-2007, 12:09 PM
Good comments from lizard, SEC and ratkin


I think people should wait a while before rushing in and buying. This correction could last for 2-3 months IMO. The speccy shares are the one's that wiil be hit hardest and they will also be the bargains in a couple of months time.

I'v got my eye on a couple of speccy shares to buy if they reach my target price - they need to fall a lot further yet.
.

shasta
30-07-2007, 06:25 PM
Mick100

Whats your cash position percentage? (Dont mean to be nosey, just interested!)

I've been culling down the number of companies i hold & selling down & locking in profits in those i've kept onto.

It's always been one of my biggest down falls to always be close to fully invested & not have the cash available to jump on bargins.

I just can't sit on 6% returns at the bank! [xx(]

craic
31-07-2007, 10:01 AM
My action in this case is to record the total value of my cash and stocks in my diary, set a date - in this case the 5th October - and not look at my portfolio sheet till that date and do nothing in the meantime. If I get nervous,I make mistakes like most people. In recent times I sold three substantial holdings at a modest profit because I thought they were stagnant, only to find that they became takeover targets five minutes after I sold them. I would like to know if the chartists have a chart that predicts takeovers?

whiteheron
31-07-2007, 12:51 PM
I tend to have the same problem as shasta finding myself fully or near fully invested nearly all of the time
The problem is that I cant resist buying what appear to be stocks with really good prospects so that when there is a sharp downwards correction and bargains available I am not in a position to capitalise on the situation

Oh, if only I had 5 to 10 times more capital I would be able to make some really serious dosh !
and would be able to carry (say) 20 % in cash for those opportune times

duncan macgregor
31-07-2007, 02:07 PM
quote:Originally posted by whiteheron

I tend to have the same problem as shasta finding myself fully or near fully invested nearly all of the time
The problem is that I cant resist buying what appear to be stocks with really good prospects so that when there is a sharp downwards correction and bargains available I am not in a position to capitalise on the situation

Oh, if only I had 5 to 10 times more capital I would be able to make some really serious dosh !
and would be able to carry (say) 20 % in cash for those opportune times
You have no need to do that WHITE HERON. I sell my worst share down, to buy into the new share, it only takes a ph call. I normally buy a half stake first, then the other half later when it is in profit. Very seldom buy all at once, but have no hesitation in selling all at once, adding to one or two companies if need be. Macdunk

Mick100
31-07-2007, 02:12 PM
There are always opportunities to raise cash after a correction has started - today is one of those days.
.

AMR
02-08-2007, 09:42 PM
Well, things have improved a fair bit since I started this thread. I've stopped checking every hour since I will not seriously consider moving selling any stocks out of my portfolio in the next 3 years or so unless there is a catastrophic event. Will consider topping up on FPH over the next few months and maybe PRC after December 2008. In the meantime will be looking at other blue chips to add to my portfolio.

living2
08-08-2007, 02:48 PM
"Ben Stein" "How Not to Ruin Your Life"

How Speculators Exploit Market Fears
by Ben Stein
Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story Excellent (1722 Ratings) 4.188742/5
Posted on Thursday, August 2, 2007, 12:00AM
Here's a fact: The speculators and hedge fund managers who run today's stock market need market volatility in order to make money.


They can't make enough money if the market stays flat or moves only a bit, so they like extreme and unexpected price movements. They especially like sudden, surprise movements down, when they can make money off stocks they borrow and sell -- or, as they say, "sell short."


Money Lust Satisfied


That's what's been happening the past couple of weeks. But it's not interesting to say that the speculators are whipping the market around to satisfy their money lust. So the speculators themselves make up reasons for why the market is fluctuating, flog those reasons to the media, and then profit if some other speculators believe the jive reasons and jump in the way the manipulators want them to.

Supposedly, the market is "correcting" because of worries about the housing slowdown, and also because of fears that the debt markets that support mergers and acquisitions is drying up.


These are interesting theories, and people who don't know a lot about the stock market or the economy might find them beguiling. What follows are a few truths that show how shallow these "reasons" for the stock market moves are.

Housing a Theory


Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.


In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That's not trivial, but it's also not the stuff of which recessions are made.


The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.


Corporate profits set new records every day. Whatever's happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in -- and for no other reason.

A Minor Major Mess


Subprime is a mess. But it's a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages.


Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market -- a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it's nothing.

And why should a crisis in subprime drive down stocks in Mexico and Thailand? Again, because the speculators seek to create panic to make money by selling short, and they sell short everything.


There's simply no connection between subprime and developed or developing nations' stocks. This by itself shows the thin context of the selling wave late last month.

Money's Still Cheap


What about the supposed drying up of loans for mergers and acquisitions by private equity firms? Well, here's a good, simple test of just how valid that explanation is for stock market moves: The majority of private equity takeovers are financed with junk debt.

If there really were a major shortage of funds for these deals, the interest rate on the junk would skyrocket. Instead, while the rate has risen by about 150 basis points in the past month, the spread between junk and investment grade is now about 290 basis points, according to leading junk analyst Martin Fridson.

This is a lot lower than the year-end average of the spread from 2002 to 2006, and far below the almost 800 basis point spread during a true interest-rate crunch like the one after the tech meltdown in 2000-2002.


So that's phony, too. Interest rates have risen, but not anything like what they've done in real crises. And besides, the Dow fell by about 550 points the week before last, yet not one of the Dow stocks is involved as either acquiror or acquiree in a private equity deal.

In short, money is no longer virtually free the way it was for private equity deals in the past year. But it's not expensive by historical standards, either.


Spreading the Fear


In other words, it's all the speculators trying to panic us so their sell programs will make money. And they'll make money as long as they can spread their panic. When they can't do that any longer, they'll work the long side -- and make up reasons for that, too.


In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don't sell. With all the shrieking about the market, it only fell to what it was about five weeks ago -- and we didn't think we were poor then.

So let the speculators shout "fire." As of right now, they're not blowing anything but smoke.

Steve
11-08-2007, 02:33 PM
Good article. It's all about keeping everything in perspective...

whiteheron
11-08-2007, 06:45 PM
In the last week I have had an in depth look at all of my holdings, selling down or out of those that I consider have the least promise and buying into or increasing my holdings in those that I consider have the best promise
One can never be sure that one has done the right thing but I believe that taking action is better than freezing like a stunned rabbit

As a matter of interest Friday was my worst day ever on paper but I am not pannicking as my holdings are all sound and I am sure that they will return strongly sometime in the next few months
Picked up PEM and FAR at what I consider to be very attractive prices

Hindsight is great, but I consider that foresite is better
Time always tells --- but the ability to assess the future well is far more rewarding than analysing the past after things have gone wrong (although past pain can help with future decisions)
It is a matter of getting it right most of the time that is important

Halebop
12-08-2007, 08:45 AM
The Ben Stein article is terrible. "Speculators" are causing these problems? It reads like a conspiracy. They all get together in a smoke filled drawing room and work out which companies and markets they will move today? The only people with such plans I suspect are the reserve banks. We are seeing markets at work, not just speculators. Many of the true speculators are currently being undone rather than making jam.

POSSUM THE CAT
12-08-2007, 09:38 AM
PHAEDRUS I can understand your point from a trading point of view. But if everbody followed your doctrum the graphs would neve change. If somebody does not buy in a Downtrend what changes it into an uptrend. I would appreciate your explanation of this.

Phaedrus
12-08-2007, 10:23 AM
Fear not, PtC! The chances of everyone following a single system (mine or any other) is ZERO. There will always be different opinions and approaches co-existing quite happily in the market.

Halebop
12-08-2007, 10:35 AM
Fear not, PtC! The chances of everyone following a single system (mine or any other) is ZERO. There will always be different opinions and approaches co-existing quite happily in the market.

...and less happily on investment forums :D

thereslifeafter87
14-08-2007, 03:20 PM
How do you cope with your shares dropping in value While operating a buy-and-hold strategy?

There are many tried and true methods. You can see them all being demonstrated right here on ST.

(1) Tell yourself lies such as "I haven't made any loss until I sell". (No selling = no loss. Neat!)
(2) Affirm to yourself and others that you are a longterm investor in for the long haul. Market fluctuations do not concern you at all. In fact, you are not even interested in discussing such trivia.
(3) Rework all the fundamental calculations on which you based your stock selections. You will find that they will look better than ever as the market weakens. See this as vindication of your choices. If you thought they were worth buying before, they now represent even better value.
(4) Convince yourself that "Mr Market" is a manic-depressive fool. You are right and the market is wrong. Without question. This is a very important point and it is imperative that you have total confidence in your abilities. You must be convinced that there is no chance whatsoever that you got it wrong. This is no time for self doubt.
(5) Ask yourself "What would Buffett do?" It's irrelevant and you don't know, but ask anyway!
(6) Buy more. See the general market weakness as a wonderful opportunity to "Top-up" your holdings. This is a good word to use because it avoids the negative connotations of "averaging down". Pretend that you actually like it when these things happen. Be brave when others are fearful and show your confidence by buying more.
(7) Concentrate on dividends. These are real money while capital losses are illusory. As the market weakens, continually recalculate the dividend yield of the stocks you are holding. It is very gratifying to see these figures rising so nicely. Think of yourself as being cool, calculated and reasonable. Refer to worriers as "headless chickens". You will know that you have become a mature exponent of this approach when you can say something like "I don't care what the SP drops to so long as they keep paying the dividends."
(8) Think of all the brokerage you would have to pay if you were to ever sell any of your stocks. Concentrate on minimising this sort of unnecessary expense.
(9) Remind yourself frequently that you are an investor and NOT a trader. Traders are undisciplined rabble and beneath contempt. Remember, there is no middle path. This is an important point - you must choose one or the other. There can be no compromise here.
(10) Think about the possibility of your being assessed as a trader by the IRD. Think about the horror of having to pay tax on your capital gains. You don't want these things to happen - right? The only way to safeguard yourself is to never sell anything. Ever. Keep telling yourself you are a longterm investor with a buy and hold strategy. This must become your mantra. Use it to drown out any negative thoughts.

It is easy and profitable to be a "buy and hold" advocate when stocks are going up nicely. Unfortunately there are times when it is difficult and unprofitable. To resolutely hold in the face of a falling market takes a certain type of person. Maybe, just maybe, you are not one of them. This is nothing to be ashamed of. You are not alone.

LOL Phaedrus.

If there is one thing I have learned from you it is that when a stock starts going into a downtrend, there is usually a good reason for it - the smart money knows something you don't.

That said, I feel comfortable buying a stock that has dropped if the general market has dropped as well, but am now very wary of buying stocks that are dropping without falls in the general market.

duncan macgregor
26-08-2007, 07:05 PM
My NZ portfolio was sold up completely in Jan. If I was still in the market my portfolio would only be worth 73% of what it was in Jan.

I've locked in the years gains for the ASX portfolio by selling. I'm pretty sure its going to get worse before its better, and I am also looking to move into a totally different industry sector so sitting on cash for a while suits me. I got out the NZX and onto the ASX in Jan this year had the best returns of my life to date plus a 3% double whammy in the fall of the NZ dollar. Macdunk