<p>One big piece of investing success is investor personality. We live in a neighborhood of highly educated people. Some of these neighbors were selling all their stocks at the March 2009 bottom … some were doing a lot of buying. If you accept the notion that “if your investment horizon is ten years or more, it doesn’t matter when you invest” then you’ll have a remarkably different result than if you believe “the market is cyclical, and within cycles it goes up and down.”</p>
<p>Bottom Line: Bad companies can be good investments … and good companies can be bad investments. Process is EVERYTHING when it comes to a stock portfolio.</p>
<p>^^^^</p>
<p>Holding a stock in long term does NOT necessarily lend itself to prosperity. Look at Citibank, where is it now and where was it 10 years ago? I bought Cisco at 13 and thought I did a kill, ten years ago. I barely get my money back if I sell today.</p>
<p>Of course there are success stories, but there are no promises.</p>
<p>Another truism in the market is ‘never fall in love with your portfolio’. You should always have a target price where you sell (take your losses & move on or cash in gains). I don’t believe in dollar cost averaging a stock on its way down. </p>
<p>I’ve also found when you hear bad news, especially anything that hints of accounting fraud, it’s better to sell first, then ask questions. I remember when the Parmalat scandel hit many years ago - my firms held some and I said ‘sell’ and the portfolio manager wanted more info. We took a bit hit.</p>
<p>The Peter Lynch school of investing is also good guide - buy what you know & like. He loved Dunkin Donuts coffee, so he bought the stock. If you can monitor company performance ‘on the ground’, you are in much better shape than someone who sits in an ivory tower. I don’t get the quants who simply buy based on chart movement - my first question is ‘how does the company make money?’.</p>
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<p>How true! I have a friend who had believed in “Wang Lab” in the late 80’s. He “dollar averaged” that stock from 30, 15, 8,4…with all his money. Until it died on him. Sadly, he died with it, he was diagnoised with liver cancer. Fortunatly, he had no wife and no children.</p>