What are your Investment Rules?

[SBQ]

Focus on the experience the customer receives, not the price paid
https://www.youtube.com/watch?v=h89uOvUDVO4

and it's that customer experience that has unlocked America's potential:

https://www.visualcapitalist.com/wp-...y-2021-V15.jpg

[kiora]

https://www.tradingview.com/chart/BT...y+145+%28EN%29

"how traders are different from gamblers.

1) As a trader, one’s aim is to focus on the next 100 trades instead of the next 10. Long-term success, profitability, and consistency are two of the main things traders should target. However, a gambler’s wish and desire is to make quick money.

2) A successful trader/investor has a backtested trading plan that he sticks to and optimizes along the way, adapting to changing market conditions. On the other hand, gamblers like to trade based off what other people think and tweet, or by simply opening a random Buy/Sell position and hoping it plays out successfully.

3) Profitable traders always diversify their portfolio and risk no more than 1-2% per trade. On the contrary, gamblers go “full margin mode” on a single trade without setting a Stop Loss and end up blowing their accounts and blaming the markets.

4) Chasing markets and rushing the process is not what real traders do. Instead, they follow their plan and wait for the price to play out and match their entry criteria before executing. Nonetheless, gamblers like to overtrade, open positions based on nothing, make biased decisions.

5) When enduring a loss or two (or three), traders neither get emotional nor try to revenge the markets. They know that if they obey risk management principles and open high risk-to-reward positions, they will cover all their previous losses and get back to making profits. Gamblers, on the other hand, get angry and start attempting to revenge the market by making foolish decisions and entering many illogical trades.

6) Last but not least, if you want to be successful and profitable in this field, you have to treat trading as a business and take things seriously. Those that think markets are a playground or a casino machine will never succeed in this space."

AND worth reading the comments
"
bertanarg
∙
2 hours ago
∙
TradingView for Android

Just looking on the mathematical side of this discussion, there is no big difference. There is a probability of success, a probability of loss and a probability distribution for profits and losses.

One advantage of investing in financial markets is the long term positive expected value, which diminishes the shorter time horizon you have.

Lets put it
investing = long term trades, where you oftem have the edge on your side
trading = short term trades, where you can have the edge on your side if you did the maths
gambling = dont care about the stats and just following your gut feeling and emotion in placing and sizing trades

By the way, it is even possible to be profitable in sports betting if you do it properly. In my opinion putting labels like trader, investor or gambler on anyone who is active in a specific area is therefore a consequence of a superficial and not profound understand of the matter."
"
brmicha2000
∙
an hour ago

Absolutely. I just wanted to add a couple of things. Gamblers always think that they can tell the future so well that they can make the big bet on their prediction. That doesn't really make much sense when one thinks about it. No one can tell the future. Trading systems are about making trades based on a back-tested system where you know what the future statistics are likely to look like. They trade based on probabilities of an outcome. They exit in a loss when those probabilities turn out to be wrong in this case, and they look at the longer term statistical outcome. Trading systems care more about what the statistics look like month to month, such as win percentage, risk to reward ratio, and max drawdown. They analyze these factors on a consistent basis to understand how the system is doing from a statistical standpoint. Saying the market is not predictable would upset just about all gamblers. Of course, another way to do things is to invest, which is far different from trading. Investing is buying undervalued, solid companies or other assets based on fundamentals. Various ways can be used to collect on those assets over time. Investing could be in any valuable asset including real estate, (which right now, is likely quite overvalued as a sector). Collecting dividends is a big part of it, and tax considerations are a major part of it. All businesses care about taxes. I take money from trading systems and place it into longer term investing and dividend collection to build a trading business. I also use low risk options strategies to collect on those assets. I find it difficult to believe that all someone wants to do is run trading systems in a high risk environment such as index futures, (even though I really enjoy running trading systems in these environments)."

[kiora]

And here is a strategy that sounds interesting but complicated ?
https://www.tradingview.com/chart/PY...y+145+%28EN%29

Looks like interesting ideas ?

[kiora]

Could easily be How Science is Taking the Luck out of Investing. rather than gambling
https://www.youtube.com/watch?v=658xlubwnDc

[Pricey]

What are peoples asset allocation strategies? I am trying to re-defined my own, after having lost some money! My WIP:

- To hold between 70 - 80 per cent. In the share market (with the ability to deviate in downturns)


- No more than 10% invested in an individual company at the time of investment


- No more than 20% invested in any individual company at any time


- 0-5 hand picked companies: no more than 60 per cent


- 5 - 10 hand picked companies: no more than 70 percent

I am going to start benchmarking my portfolio better as well, so if my hand picked companies don't outperform the funds/ETFs then the percentage allocation gets revised down (and vice versa). I also mix this with "investment considerations" when deciding whether to invest in a company e.g. global revenues, non-correlated industries.

[kiora]

The downside of that diversification strategy is it could easily trim the ones growing the most once they get to the 20%.My strategy is to let the winners run & cull the laggards.
After investing in the markets for over 40 years I still could be wrong !
The longer I have been investing the less diversified has been my share portfolio.
But I have diversified through managed funds & other less liquid investments.
Any strategy should consider liquidity

"Diversification reduces risk by investing in vehicles that span different financial instruments, industries, and other categories. Unsystematic risk can be mitigated through diversification while systemic or market risk is generally unavoidable"

The downside of diversification is
"Yes, Diversification Can Hurt Your Portfolio"
https://www.forbes.com/sites/kennethwinans/2020/01/06/yes-diversification-can-hurt-your-portfolio/?sh=d50754420458"

[kiora]

https://seekingalpha.com/article/448...erm=must_reads
"It is somewhat concentrated and certainly not diversified in the traditional way. It was put together piece by piece and occasionally pruned by elimination of positions which appeared to have a problem. Despite the lack of diversification it is rather conservative as befits a man of my age (77) but I think it will continue to have reasonable growth."
(It is not me that this refers to)So concentrated & conservative can work well. The longer /older an investor becomes the more diversified their investments can become with increased capitol.

The other lessons this article mentions is
Conviction. How many times do we hear, "I should have brought more" Back your gut instinct, "all in" particularly when still young & earning.
Tier Holdings Most investors like to take a punt. It does little harm to total returns if these holdings are kept small and added to latter & can be quite exciting

[Pricey]

Thanks for your thoughts. I am recently in the "for" side on diversification, the explanation of "the power of diversification" in this article sold it to me: https://www.fool.co.uk/investing-bas...et-allocation/

The reason for the cap of 20% is because it forces me to take money off the table and re-invest elsewhere when the portfolio is imbalanced. I have seen a lot paper gains wiped out e.g. ATM, OCA, RBL (on the ASX). and am slowly starting to learn to "leave some on the table for others". Long-term winners should stay within the cap because I will continually invest and expand the pie - or so the theory goes!

[kiora]

Similar to my strategy
"Around 80% of our portfolios by stock number are anchored around more sizeable, liquid companies where we have a lot of confidence in the medium to long-term outlook. These companies are typically a bit more mature in their development but would also be considered as being higher quality (e.g. strong management, higher returns on capital etc) and still have prospects for efficient growth. The balance of the portfolio is a ‘nursery’ of ideas that we believe have excellent potential in the medium to long-term but are earlier in their journey."
https://www.livewiremarkets.com/wire...med-for-growth

[kiora]

https://finance.yahoo.com/news/munge...152046657.html
Munger on diversification
"if you have 4 good investments that's enough,20 then you're likely to have egg in your beer"
BH never tries to "time the market", tries to be 100% invested.
"People driven by envy not greed"