# Your Investment IQ



## Julia (4 December 2005)

There is an interesting questionnaire about your investing profile on

www.marktier.com

which claims to tell you your investing IQ.

It came to me via one of the financial organisations from whom I had had a free trial some time ago.

I did it and found it very accurate.  e.g. It pointed out my worst weakness which is being unclear about why and when to exit a stock, and various other characteristics which were really close to the bone, and gave suggestions for how to overcome these weaknesses.

I'd be interested to hear comments from other forum members who feel like doing the test - it takes about 10 minutes and your results are emailed back within about 15 minutes.

Julia


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## It's Snake Pliskin (4 December 2005)

Julia,

It sounds like you don't have a plan with steps on selling to follow.

Read some systems development books and trade the plan.

Snake


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## crash82au (4 December 2005)

Although Im only learning at the moment and have made only 2 trades, I completed this test. I couldnt answer a lot of questions and the results are bit sceptical for me   

I plan on developing a trading plan so I assume the results of the test wouldve been a lot different if I had a system to trade to in place.


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## Julia (5 December 2005)

crash82au said:
			
		

> Although Im only learning at the moment and have made only 2 trades, I completed this test. I couldnt answer a lot of questions and the results are bit sceptical for me
> 
> I plan on developing a trading plan so I assume the results of the test wouldve been a lot different if I had a system to trade to in place.




Crash,

Not sure what you mean by "the results are a bit sceptical for me"?

Also not sure how you could get a valid result if you couldn't answer all the questions.

Julia


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## crash82au (5 December 2005)

Hey Julia - Im sceptical of the results because Im inexperienced and the results rate my investment ability close to expert. I answered all questions, but once I begin trading seriously(with a plan) the outcome would be a lot different. So maybe it has tested my so called 'investment iq' to the ways I currently trade the market. Still interesting though.

Danial


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## canny (5 December 2005)

Thanks Julia - that killed a few minutes and made me think about myself!!

I learnt that I need to know more about computers, as I can't post the chart they sent me!!!
How did the last poster do it?

Investment IQ Report Prepared For: Don't know how to post the chart!! I got 79.9%
To Summarize:

By and large, you are getting the investment results you desire
You have many of the strengths of highly successful investors
You are almost always calm and considered when implementing investment decisions -- and indeed, you are probably reasonably satisfied with your performance under pressure


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## michael_selway (5 December 2005)

Julia said:
			
		

> There is an interesting questionnaire about your investing profile on
> 
> www.marktier.com
> 
> ...




Wow Thanks! Julia can you please post your chart!   

http://www.marktier.com/IQ-test.htm

http://marktier.com/ippq/Graph.php?retval=73.2







Investment IQ Report Prepared For: 
MICHAEL SELWAY

The purpose of this report is to identify the investment strengths and weaknesses that have been revealed by your answers to the Investment I.Q. Questionnaire, and to suggest ways you can refine and improve on your current investment practices.

The analysis -- and recommendations -- are based on the winning investment habits of Master Investors like Warren Buffett and George Soros. So the questionnaire, in effect, compares your investment practices to those of the masters -- as the chart above graphically displays. 

The first section lists your major strengths and weaknesses; and the final section makes recommendations that, if you follow them, should result in improved investment performance. 

To Summarize:

By and large, you are getting the investment results you desire
You have some of the strengths of highly successful investors -- but several weaknesses that are holding you backYou have many of the strengths of highly successful investors
Investing is often a source of anxiety for you. If you follow the recommendations listed in the final section you should be able to reduce that anxiety considerably
Your Investment Strengths

You make your investment decisions independently

The successful investor generates his own investment ideas based on his own research. Furthermore, he restricts his investing activities to what he knows and understands. The result: he makes his decisions based on FACTS that are personally known to and understood by him.

The investor who bases his investment decisions on something he reads in the newspaper, the opinions of friends, follows some tip from his broker or another investment adviser can never be wholly sure that he's doing the right thing. 

By coming to your investment decisions independently, you are following in the footsteps of the Master Investor. This does not mean you should not get ideas from other people. There are always more sources of investment ideas than you could possibly develop entirely on your own. What is important is that you do your own, independent research and evaluation before making a decision to invest regardless of where the initial impetus originally came from. 

Since you're following this practice, you've probably already realized that 'good' investment ideas that everybody else knows about aren't really much good at all.

You are clear about your investment goals

The Master Investor's primary focus is the process of investment. The profits he expects to make, while very important, are actually secondary. A major secret of his success is that he enjoys the hunt, the process of discovering new investment opportunities that meet his criteria. 

Investment profits are a means to some other goal, not an end in themselves. So perhaps like Warren Buffett, for you investing is just plain fun. Or maybe your primary goals are security or independence, or similar objectives that your investing helps you achieve. Paradoxically, once you have discovered them -- if you have not already -- your investing will make you more money when profits are no longer your primary aim. 

Needs Some Improvement

You can learn more from your mistakes

One of the most important habits the Master Investor follows religiously is that whenever he makes a mistake he goes over everything he did, how he came to his decision, how he executed it, whether he monitored his investment properly and so on to find out what he did wrong...so he won't do it again.

Occasionally he might be unable to uncover any evidence that suggests he did not follow all his rules. If this happens, he will try and figure out if there's been some change in the market that means his investment approach is no longer working, or needs to be modified in some way. Or looks into himself to see if, perhaps, he has changed in some way that he had failed to recognize. Or he may realize that he's been under stress and should take some action to minimize that.

It appears that much of the time -- but not all the time -- you have a similar attitude towards learning from your mistakes. 

Most people prefer not to dwell on their mistakes and so are fated to repeat them. 

Not you. But it will pay you to analyze your mistakes more rigorously and consistently than you have in the past. The result will be to turn your mistakes into learning experiences.

For example, set aside a fixed time once a week (or if you are a day trader, perhaps once a day) to review any mistakes you may have made, no matter how small they appear to be. Being willing to be self-critical is a powerful practice that will enable you to continuously refine your method of investing. 

You sometimes have trouble 'pulling the trigger'

When the Master Investor has made a decision to buy and sell, he acts immediately. The process of phoning his broker has much emotional significance to him as when you phone a restaurant to make a dinner reservation. 

When you have made an investment decision, however, you sometimes have difficulty 'pulling the trigger.' 

There have probably been occasions when you've identified an opportunity but missed it -- because the price zoomed while you hesitated. Or agonized over when to take a profit. And, perhaps, occasionally, you were too tentative: buying only a small amount when you 'knew' you should buy more. 

When this happens, it is an indication that you are not always sure about what you are doing. 

So if you were to look back over your past investment decisions and compare the times when you acted immediately and the times when you agonized over it, you will probably find that the times when you procrastinated were the times when you weren't really sure you were doing the right thing.

From this exercise you might even find that the investments you made when you acted instantly were the ones you really understood. So -- assuming of course that your confidence in what you were doing was not misplaced -- you might discover your investment niche; and were you to specialize in just these kinds of investments, you will probably find that you'll consistently make money. 

Acting instantly once you've made an investment decision -- when your confidence comes from really knowing what you're doing -- is a trait that really separates the investment sheep from the investment goats. 

You should take a longer-term view

The Master Investor has realized that the key to success is to maximize the annual rate at which his capital compounds. 

Taxes and other transactions costs have a direct impact on that annual rate of return. 

By minimizing such costs, he can increase the 'magic of compound interest' by several percent per year -- without making an investment of any kind. 

It appears that you may be overlooking the significance of transaction costs. Transactions costs eat into your capital, especially for the more active trader.

Say you have $100,000 and you can shave your transaction costs by 0.5%. That's $500. Chickenfeed, right? Well, if you are averaging 15% return on your capital every year, in 20 years that extra $500 per year compounds to $58,900. At 20%, it grows to $112,000. That's serious money and it shows how a tiny savings can balloon.

In this example, just by making a change in a seemingly insignificant detail you can add an extra 50% to 100% to your net worth without making a single investment decision.

The effect of taxes can be far greater. So the Master Investor focuses on his after-tax return. Both Buffett and Soros have added hundreds of millions, if not billions of dollars to their net worth simply by making their investment strategies tax-efficient. You should follow their example and maximize the amount of your capital and income that can compound pre-tax. 

Like every other aspect of investment process, the arrangements you have made should be reviewed periodically. Continued competition in the brokerage industry, for example, may result in lower commissions becoming available. And tax laws are continually changing.


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## Julia (5 December 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> It sounds like you don't have a plan with steps on selling to follow.
> 
> ...




Hi Snake,

Do you have a plan which ensures you are always able to pick the peak of any stock you hold and exit accordingly?  If so, I'd love to know about it as this is the weakness I described.

Cheers
Julia


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## Julia (5 December 2005)

canny said:
			
		

> Thanks Julia - that killed a few minutes and made me think about myself!!
> 
> I learnt that I need to know more about computers, as I can't post the chart they sent me!!!
> How did the last poster do it?
> ...





Hi Canny

I've had the same difficulty in trying to post something from a website and had assumed it had something to do with copyright, but that can't be right as Crash was able to do it.  Can anyone enlighten us?

Thanks for posting some of your "results".  I received the same initial comments (so perhaps this is a standard response to make us feel OK)
but then it went on to point out my weakness re exit points.

Can a few other people do the test, even if just to see if we all receive some degree of sameness in the "results"

If that is the case, unless we are all pretty much the same in our investing approach, one would have to be less than impressed with what at first impression seemed like a reasonable questionnaire.

Julia


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## michael_selway (5 December 2005)

canny said:
			
		

> Thanks Julia - that killed a few minutes and made me think about myself!!
> 
> I learnt that I need to know more about computers, as I can't post the chart they sent me!!!
> How did the last poster do it?
> ...




you can either attach it

or u can upload it to http://imageshack.us , get the direct url and post it here using the code, Eg.






------------------------------------------------------------

Your Investment Weaknesses

You lack a consistent investment focus

It seems evident from your answers that you are not clear about the kinds of investments that work for you -- and those that don't.

The Master Investor has clearly defined his 'circle of competence.' This means that he has drawn, so to speak, a circle in the sand. Within that circle are the investments and investment methods he understands. Outside that circle are investment categories he knows little or nothing about. 

The Master Investor's edge, his 'competitive advantage,' comes from being crystal clear about where that line is drawn; and making investments only within his circle. As a result, he will only buy an investment he understands. And he makes a point of learning as much as possible about the kinds of investments within his circle of competence.

In other words, he specializes. Even investment 'whales' like Warren Buffett and George Soros occupy a tiny niche in the multi-trillion dollar investment marketplace. 

By the same token, investments that are not in his circle of competence simply do not interest him. He just ignores them.

You have yet to make this distinction.

It's crucial to define your circle of competence as that's the only way you can consistently find investments which are, in Warren Buffett's words, 'high probability events.' This means: investments with the prospect of a substantial profit and a small to negligible risk of loss. 

And to emulate the Master Investor, it's imperative that you avoid entirely investments you do not understand, no matter how appealing they may seem. Quite probably, if you think about it, you will realize that this has been a major cause of past investment losses.

To improve your investment results, it's essential that you define your circle of competence and clarify your investment criteria; and there are some suggestions you are urged to consider in the last section.

You have not developed a fully-fledged search strategy

For too many investors, the most important actions are the buying and selling of an investment. The reality is quite different: the Master Investor spends the majority of his time looking for investments that meet his criteria. Buying and selling are actions that take but moments. 

The Master Investor has, of course, clarified his investment criteria so he knows exactly what kind of investment he's looking for. 

It's a tautology, but it's worth emphasizing: only if you have defined your investment criteria can you develop a search strategy to find investments that meet them. 

But it seems that you don't really have a search strategy, and the probable reason is that you have not clarified your investment criteria. 

The act of defining them often makes the search process obvious. So that is the place to start. 

And you'll find some suggestions that will rectify that situation at the end of this report.

You don't have an exit strategy

The Master Investor has developed a very clear exit strategy. Before he even buys an investment, he knows exactly what would cause him to sell it. His rules for selling grow directly from his reasons for buying. In other words: from his investment criteria. 

From your responses to the questionnaire it is evident that taking profits (or cutting losses) can be a source of great stress and anxiety for you. The probable cause is that you have not clarified your investment criteria.

Without proper investment criteria, it's simply impossible to have a fully-developed exit strategy. To put it another way: if you don't know why you are buying an investment, how can you know when to sell it. 

As suggested above, it's essential that you first define your circle of competence and clarify your investment criteria and only then will you be in the position to create a fully-developed exit strategy. 

Recommendations

It appears that, by and large, you are getting the investment results you desire. 

Even so, there is always some aspect of your investment approach that can be improved, especially if you developed it by trial and error. 

By going through the following exercises and using them as a gauge to judge your current practices you're bound to find something that can be further refined.

1. Check the clarity of your investment goals

A driving force behind the Master Investor's success is his investment goals. And he is, of course, very clear about what they are.

So it's important that you are also very clear about yours. Even if you feel that you have that clarity, it pays to review them from time to time. Simply ask yourself: WHY are you investing, what's your purpose?

Paradoxical as it may seem, your purpose in investing is NOT to make money. Making money is the means to your ultimate goal. For example, your goal might be security. If it is, then losing money will jeopardize its achievement.

If profit is your only investment objective, you'll find -- strange as it may seem -- that those profits will improve when you discover and focus on your underlying 'higher' goal. 

2. Refine your investment focus

The successful investor specializes. He clearly defines his circle of competence and stays there. He doesn't go venturing into unknown territory. The Master Investor goes one step further: he occupies a tiny niche and learns everything there is to know about it. 

For success, it's essential that you have a similarly narrow focus. One way to improve your investment results is to refine your 'circle of competence.'

Simply ask yourself the following questions:

What am I interested in? What class of investments and what aspects of investing fascinate me?
What do I know now?
What would I like to know and be willing to learn? 
This will help you 'draw the line' (if you have not already done so) between what you know (or are willing to learn) and what you don't know. 

Finally, by only making investments inside your circle of competence, you will follow the Master Investor in only investing in what you understand.

And as markets change -- and as you change -- it's worth revisiting these questions once a year or so to keep yourself on track; and to see if there are any changes you need to make. 

3. Refine your investment criteria

Your investment criteria are all the reasons that go into your decision to purchase an individual investment. 

Here are two processes that can help to both refine your investment criteria and pinpoint any weaknesses in your investment methodology:

1. Go through your past investments and separate them into two 'piles,' the winners and the losers. For each category, analyze why you lost money or why you made a profit. What did you do differently? For the winners, what did you do that was the same? Answering these questions should lead you to focus on what, in the past, you've done RIGHT.

2. Go back over previous investments and write down all the reasons why you bought them. Whenever you make a new investment, again, write your reasons down so that you can refer to them easily in the future. At the same time -- that is, BEFORE you make the investment -- write down exactly what factors would cause you to take either a profit or a loss. 

The successful investor is ruthless when it comes to taking losses -- and one reason is that he knows before he buys exactly what factors would cause him to sell.

This process effectively forces you to hone your criteria, and will also help make your own thinking processes clearer to you. 

Keeping written records of your reasons for making each of your investments will help you continually refine and improve your investment methodology.

4. Is your investment system complete?


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## It's Snake Pliskin (5 December 2005)

Julia said:
			
		

> Hi Snake,
> 
> Do you have a plan which ensures you are always able to pick the peak of any stock you hold and exit accordingly?  If so, I'd love to know about it as this is the weakness I described.
> 
> ...




Julia,

I have at this stage put some time into my plan in order to know where I stand before I trade a stock. I have selling and stoploss rules that come before anything to do with buying - so basically I know when I'm selling a stock before I decide to buy a stock. However, I don't know what price I will be selling at until it happens - it seems to be a paradox.

There is nothing exciting with my exits - pretty standard stuff, but I use a 10 day and 35 day moving average crossover with oscillators: RSI and Stochastics. A larger, say 100 - 200 day moving average can be of help too. 

My plan doesn't allow me to pick the peak before it drops. It does, however, protects profits by utilising a trailing stop - as the price increases so does the trailing stop. Setting stops is an involved topic and requires much study and testing I believe. It is something I'm still working on and will continue to work on - hopefully Nick's book will be of value here.

Importantly, this suits me and may appear flawed to others, but that's the beauty of trading. It must suit the trader.

A good book to read would be Louise Bedford's Trading secrets, and then move on to Van Tharp's book as she suggests. Read other books beyond that.

cheers
Snake


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## tech/a (6 December 2005)

Interesting test.


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## Julia (6 December 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> I have at this stage put some time into my plan in order to know where I stand before I trade a stock. I have selling and stoploss rules that come before anything to do with buying - so basically I know when I'm selling a stock before I decide to buy a stock. However, I don't know what price I will be selling at until it happens - it seems to be a paradox.
> 
> ...




Hi Snake,

Thanks for explaining what you do.  Yes, I understand about trailing stop losses, but that (and probably nothing ) doesn't preclude selling too early or hanging on in the expectation of a continuing rise.

Here is an example I had recently:  I had a holding of 2000 Record Investment Ltd. (RCD), bought in October 2004 at $4.96.   Various broker sources suggested they were fully valued at about $7.70.  So I decided to take some profits and sold 1000 end of October 2005 (OK re CGT). However they continued to rise and obviously I regretted selling half.  Purchased 1000 back again 28.11.05 at $8.40.  They are continuing to rise, given small fluctuations, but I have needlessly incurred extra costs from buying back shares at higher price plus brokerage and GST in both directions.

I doubt that there is any plan which will completely cope with this sort of situation.  If there were, we'd all be much richer than we are I suppose.

Cheers
Julia


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## tech/a (6 December 2005)

Julia.

There will always be instances where you'll be damned if you do and damned when you dont.

To be able to sell at the exact peak and buy at the exact trough will rarely happen. Picking up the meat or 80% of the middle is the main aim.


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## michael_selway (7 December 2005)

Julia said:
			
		

> Hi Snake,
> 
> Thanks for explaining what you do.  Yes, I understand about trailing stop losses, but that (and probably nothing ) doesn't preclude selling too early or hanging on in the expectation of a continuing rise.
> 
> ...




Actually thats a fundamental error you have imo. Its all about opportunity. Fine you sold half to take profits which is ok (since u think its fully valued, but still may go up a bit).

However why would you buy it back? isnt there more better opportunies u coudl do with the money out there as at 28/11/05, than buying RCB which u already have? What about other stocks u dont currently have which may have more of a potential at that point in time?

Sometimes i disagree with the idea of "topping up", unless theres absolutely no other "good" stocks left to buy that i dont currently own.

What your others opinions?


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## It's Snake Pliskin (7 December 2005)

Julia said:
			
		

> Hi Snake,
> 
> Thanks for explaining what you do.  Yes, I understand about trailing stop losses, but that (and probably nothing ) doesn't preclude selling too early or hanging on in the expectation of a continuing rise.
> 
> ...




Julia,

I agree with Michael Selway and Tech. 

No one can pick the top, but having a system that protects profits is the key. The trade you highlighted looks as though it was a fundamental trade and you may not have had a technical stoploss to do the job for you. 

You said you decided to take some profits. A concrete trading plan doesn't let you decide - discretion - in my opinion, if so one's plan would be a waste of space. Broker reports don't account for much if you are using technical indicators to tell you when - I don't take too much notice of reports now.

You could try using the fundamentals to shortlist stocks and use technical indicators to time the buy and sell. 

I like tech's point of picking up the meat! You don't need the scraps - that's where people get burnt.

Snake


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## Julia (7 December 2005)

michael_selway said:
			
		

> Actually thats a fundamental error you have imo. Its all about opportunity. Fine you sold half to take profits which is ok (since u think its fully valued, but still may go up a bit).
> 
> However why would you buy it back? isnt there more better opportunies u coudl do with the money out there as at 28/11/05, than buying RCB which u already have? What about other stocks u dont currently have which may have more of a potential at that point in time?
> 
> ...




The reason I bought it back is that I regretted selling it.  (I can hear you blokes out there sighing and saying "bloody women!".)  This is something I've never done before but on honest reflection realised I had made a mistake. I  am quite happy to admit the mistake and correct it by buying more shares.

Weren't there other shares at the time that I thought had better potential?
No.  With the exception of very speculative ones which don't interest me these days.

Why did I buy more of RCD?  Partly because I am trying to consolidate my portfolio which contains too many stocks, and partly because I believe the company and its prospects deserve that percentage allocation of my investing capital.

I have since more than recovered the interim loss by the increase in the share price so am happy.  

I agree that I would benefit from some better understanding  of a technical approach, though essentially being a fundamental investor.

However,  (and this should be a separate thread if we pursue it), it would be interesting to see two identical portfolios of, say, 20 stocks, and look at the results of both at the end of a year or perhaps two when one is traded purely on the basis of fundamentals and one purely by technical analysis.

Julia


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## tech/a (7 December 2005)

Julia said:
			
		

> However,  (and this should be a separate thread if we pursue it), it would be interesting to see two identical portfolios of, say, 20 stocks, and look at the results of both at the end of a year or perhaps two when one is traded purely on the basis of fundamentals and one purely by technical analysis.
> 
> Julia




Julia.

Your implying that one will outperform the other.
Your also suggesting that its analysis that is responsible for profits.

Technical analysis can trade a portfolio in dozens of ways.
Fundamental analysis should also be more than buy and hold.

Until there is a complete understanding of how profits are derived then there is no way that one can hone those profits (become more profitable).

What you have done Julia is perfectly valid and what has been suggested as alternatives are also perfectly valid.The best option can only be known in hindsite.
However options of what to do with this or any trade during it should be put in place.
This is easier to do technically but not impossible fundamentally.


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## Knobby22 (7 December 2005)

Julia

Buying back in showed strength of purpose. Recognising a mistake and acting is what makes a good investor. It took me a while to do it and I can still improve.

I have read the book by the guy who did this quiz and really enjoyed it.
As a person who buys of fundamental analysis I really enjoyed the way Soros works which is sort of both fundamental and technical.

I know my biggest weaknesses are that when I have made a decision to buy then I often don't buy as many as I should and kick myself later e.g. I bought a few CSL shares at $14 and really should have bought as many as I could, like Buffett would have. I did the same with Woodside, buying at $15. At least I did the right thing with Oxiana.

My second weakness is that I can have too many stocks and have trouble spending adequate time on them. This caused me a big loss on one of them about 2 years ago. I had twenty two stocks at that stage.
I am correcting this slowly, looking for reasons to leave an investment. I think twelve is enough for me.

I suppose the secret is to know exactly why you are buying and then you will know when selling should take place. This can be influenced by the shareprice going up or down creating doubts. I think I am getting good at ignoring short term fluctuations.

If we compared our holdings to a technical trader, we have the advantage of less trades meaning lower costs (taxes and trading fees) and more time.
That said, the best traders can really do well and be hard to catch in performance, though I like to think I beat 80% of them. It's not that hard to beat the fund mangers though, as long as I beat them I feel I am investing OK.

I am finding it hard to get a good stock to buy at present. Are you finding this also?


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## mit (7 December 2005)

I got 91.2% so why aren't I rich   . Even though he basically a fundamental investor any TA trader would do well as the entries, exits and position sizes are very clear cut.

My weakness according to the report is a fear of pulling the trigger because I don't buy immediately. Depends on their definition of immediately as I don't buy on open but usually near close.

MIT


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## Julia (7 December 2005)

Knobby22 said:
			
		

> Julia
> 
> Buying back in showed strength of purpose. Recognising a mistake and acting is what makes a good investor. It took me a while to do it and I can still improve.
> 
> ...




Hi Knobby,

Yes, which is why I rectified my mistake with RCD.  I agree about having too many stocks as I said in earlier post, but the upside of that is there is considerable diversity so I rarely find an all positive or all negative day.

Cheers
Julia


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## It's Snake Pliskin (7 December 2005)

If one is:

protecting profits - good and risk management is present.

looking for more profit - maybe it's greed.

kicking oneself in the but - emotions aren't sorted out.


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## Knobby22 (7 December 2005)

Snake

In reply

1. If you take an early profit, you miss out on some of the gains.
2. If you are not continually looking then you are not trying. 
Good investors are always reading information on various companies.
3. Not reviewing your mistakes then you will be condemned to repeat them.


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## michael_selway (7 December 2005)

mit said:
			
		

> I got 91.2% so why aren't I rich   . Even though he basically a fundamental investor any TA trader would do well as the entries, exits and position sizes are very clear cut.
> 
> My weakness according to the report is a fear of pulling the trigger because I don't buy immediately. Depends on their definition of immediately as I don't buy on open but usually near close.
> 
> MIT




Depends what u consider rich!

Whats your NET GAIN before any taxes in shares so far, excluding dividends & interest foregone, but including Brokerage Charges


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## It's Snake Pliskin (7 December 2005)

Knobby22 said:
			
		

> Snake
> 
> In reply
> 
> ...




Knobby,

1. I agree, and have not promoted this.
2. True, once again I have not promoted this.
3. Very true, I haven't promoted that either in my posts.

My points above are just to foster debate.

Snake


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## Julia (7 December 2005)

Snake Pliskin said:
			
		

> If one is:
> 
> protecting profits - good and risk management is present.
> 
> ...




Snake:

You might like to define "greed" in your understanding of the term.

Julia


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## Julia (7 December 2005)

Snake:

You say "a concrete trading plan doesn't let you decide....."   and
 "I don't take much notice of brokers' reports".


  Really?
So if your technical indicators were showing you it was time to sell and you read a concensus broker summary (just supposing your eyes happened to accidentally pass over it) with ten brokers all describing some new event re Company A which would mean the SP would likely increase substantially in the next month, you would ignore all those opinions and sell anyway?

And, if a concrete trading plan doesn't let you decide, similarly will you stick with your indicators regardless of some important fundamental market factor which inevitably must affect the share price?

Whilst I readily acknowledge that technical techniques are probably very helpful to the trader, I simply don't see how you can ignore the fundamentals of (a) the global situation, (b) the local market conditions, and (c) the specific company factors.

If TA is the be all and end all in stock selection and trading, why is it hardly ever mentioned in the financial press in contrast to endless articles by experienced and competent people discussing the fundamentals of various companies?

Julia


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## It's Snake Pliskin (8 December 2005)

Julia said:
			
		

> Snake:
> 
> You say "a concrete trading plan doesn't let you decide....."   and
> "I don't take much notice of brokers' reports".
> ...




Julia,

The word "GREED" has not been directed at your example. 

I don't take MUCH notice of broker reports, meaning, I give them a cursory glance if I stumble across them, I didn't say no notice. 

I would still stick to my plan and system. If anything good comes of a stock it may already be reflected in the price anyway - this hapened with TSE recently. News came out of more contracts, fundamentally good, and the price went up 9 cents and dropped, and hasn't been back there since. But, if my system stops me out, and the stock turns back up, I still have my capital to buy back into it if my plan lets me. I will not chase the market though. 

With regards to the fundamental mindset, I do take notice of balance sheets, a few ratios and read some articles on the economy and investing, etc. before I shortlist stocks. Beyond that it's the plan. 

Trading a plan doesn't mean T/A is the be all and end all. Fundamental anlaysis is easier than technical analysis to understand in my opinion. If you've got the money to buy a company then be like Buffett, I'm the first one to agree here. 

Regards
Snake


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## Julia (8 December 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> The word "GREED" has not been directed at your example.
> 
> ...




Snake:

All that makes sense.  Except that if you sell then buy back in then you have to take account of the brokerage both ways.

Regards
Julia


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## wayneL (8 December 2005)

I gotta weigh in on this one  



			
				Julia said:
			
		

> You say "a concrete trading plan doesn't let you decide....."   and
> "I don't take much notice of brokers' reports".
> 
> 
> ...




Apsobloodylutely! Brokers just aren't right often enough for me to pay any attention at all to them. I don't even look...not even by accident.



			
				Julia said:
			
		

> And, if a concrete trading plan doesn't let you decide, similarly will you stick with your indicators regardless of some important fundamental market factor which inevitably must affect the share price?




It is true that fundamentals drive price....eerrrrr...hang on a minute! That can't be true! There would never have been a dot com boom if that were true. There would never be bubbles or crashes, it is sentiment which drives price.

You can have two stocks in different sector with similar fundamentals. One will be trade at P/E 60 and the other at P/E 12. Whats the the bloody difference? Sentiment! One could be in a hot sector the other in a neglected sector, but that would be the only difference.

Sentiment drives price. Technical analysis attempts to track this sentiment.

BTW T/A is not necessarily about indicators. Many don't use them. (depending on what we call an indicator)



			
				Julia said:
			
		

> Whilst I readily acknowledge that technical techniques are probably very helpful to the trader, I simply don't see how you can ignore the fundamentals of (a) the global situation, (b) the local market conditions, and (c) the specific company factors.




I have entered trades where I don't even know the name of the company, just the ticker symbol. Though I must admit to curiosity getting the better of me and at least finding this out after the event.....plus when earnings are due so I can get out of the way  



			
				Julia said:
			
		

> If TA is the be all and end all in stock selection and trading, why is it hardly ever mentioned in the financial press in contrast to endless articles by experienced and competent people discussing the fundamentals of various companies?




_"experienced and competent people"?_  hmmmmm Why would I listen to someone who writes articles for a living, giving me advise about investments?

Lets clear something up here. *Nothing* is the be all and end all. Not fundamentals, quantitative analysis, statistical analysis or technicals. 

But to answer your question:

If one wants to be an "investor" rather than a "trader", then they should consider the fundamentals. 

Investors read the financial press and this is where the financial press is directed. Traders don't read the financial press, not the mainstream anyway...unless trying to guess which way the herd is going to move. 

A trader is a different beast altogether. In my time frame, fundamentals are irrelevant, save for extenal factors affecting sentiment such as the price of oil today and whether someone is flying jets into buildings or something. But this is not really fundamental info on a micro level. These are things that get people emotions going.

Just to belabour the point... investors and traders are different animals and to try to compare methods is a folly.

To give you an idea; I do this to pay for my groceries, I don't have a job. I need to write myself a cheque at the end of every month and not dip into my original capital (and hopefully leave some profit in for compounding). Fundamentals don't cut it for someone like me..they are irrelevant. I need momentum NOW. Doesn't matter whether short or long as long as it moves. If it's doing nothing I'm out, and looking for something thats moving. By the time the press writes about it, I,ve picked it up in a scan, been in and out and long gone.

Investors can afford to let a position develop over time...very different!

So you can see, for someone like me T/A IS the be all, but only because of the time frame.

So the press is not writing for me. I am the minority. They are writing for investors, who are the majority.



			
				Julia said:
			
		

> Julia




Cheers

PS      Just throwing in some emoticoms to show my tone. No agro here.


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## ocd (8 December 2005)

I am with Wayne on this one! All the way.....


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## ocd (8 December 2005)

Took the test anyway just to satisfy my own curosity and here is the result....


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## tech/a (8 December 2005)

wayneL said:
			
		

> I gotta weigh in on this one
> 
> I have entered trades where I don't even know the name of the company, just the ticker symbol. Though I must admit to curiosity getting the better of me and at least finding this out after the event.....plus when earnings are due so I can get out of the way
> 
> ...




Just some comment on waynes comments I've listed above.
brief because of time.

(1) I think both investors and traders can do this. I still dont know what SFE do.
My neighbour "invested" in a portfolio 3 yrs ago and to this day has no idea what they do.Its well in profit and thats all she cares or wants to care.Often I ask how its going and she doesnt know.
She picked them technically with a hand from myself--I ofcourse read here the memoranda of articles.

(2) Active traders are very different to investors.I personally dont enjoy short term buzzing around in the market.Often my portfolio rises 2-5% in a week---no buzzing and that equates to  $3-8k,if I wanted to or had to live off of the earnings than I could with minimum of fuss and stress.If I ever do trade for income then it will be longer term and fully capitalised,not buzzing in and out.
I personally believe that MOST "traders" trade quickly in and out as they cannot capitalise trades to an extent that would allow a different more passive style.
Yes I know many like to trade this way and many argue that its more profitable--fine thats OK for them not me.

For me its simple.

*I take control of my decisions,I keep trading simple and I know the Numbers.
I track NUMBERS.

Stocks and their nuances both Technically and Fundamentally are simply commodities used to trade within the business.*

Endless discussion on technicals and fundamentals wont and doesnt make your profit.


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## It's Snake Pliskin (8 December 2005)

Julia said:
			
		

> Snake:
> 
> All that makes sense.  Except that if you sell then buy back in then you have to take account of the brokerage both ways.
> 
> ...




Julia,

The brokerage is not a problem if I'm not overtrading. It's about taking the best trade you can find, as I don't need the money to survive on, but I want the highest probability trade. This means I have to wait and sometimes don't click the mouse to rack up comissions. Oh, and the brokerage is factored into the equation....


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## It's Snake Pliskin (8 December 2005)

ocd said:
			
		

> I am with Wayne on this one! All the way.....




So am I. 
I won't say me too, because it's gramatically wrong :


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## dutchie (8 December 2005)

The end all and be all is --- Inside trading.


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## It's Snake Pliskin (8 December 2005)

dutchie said:
			
		

> The end all and be all is --- Inside trading.




That would be true.


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## Julia (8 December 2005)

Wayne,

Your post clarifies the difference between you and me:  you make your living from being active all the time so I can absolutely see how TA works for you.

I am a long term, largely buy and hold, investor, and echo the sentiments posted by Tech-A.   Would come close to holding the philosophy endorsed by Buffet when he said "buy stocks you will never want to sell".  Wouldn't take it that far, but 80% of my portfolio is made up of top 100 companies with solid record of increasing growth and dividends.  If I had no other source of income I could live off the dividends comfortably.  And each year there has been a decent growth in capital.

So, given the above,  would you (or anyone else who wants to offer their 2c worth) say TA would materially alter my profitability?  

My portfolio is such that I'd be quite happy not to look at it for many weeks on end, and would never have the application or energy to be trying to extract every $ on the way up with a long term stock.

Your point about brokers is well made.  The non-performers in my portfolio are the ones recommended by full service broker  when I was prepared to trust the recommendation.  No longer using fullservice broker and have a conditional sell order on all of them.
That said, if I saw a consensus recommendation with ten brokers all recommending a Buy and backing it up with valid reasons why, I'd certainly take notice.

I guess as a long term investor, I'm a bit outnumbered by traders here, unless other long term members just don't speak up?

Julia


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## canny (8 December 2005)

Hey - Crash or Michael Selway - how do you post the chart on? I tried, but only the test was pasting.
TIA



			
				crash82au said:
			
		

> Although Im only learning at the moment and have made only 2 trades, I completed this test. I couldnt answer a lot of questions and the results are bit sceptical for me
> 
> I plan on developing a trading plan so I assume the results of the test wouldve been a lot different if I had a system to trade to in place.


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## tech/a (8 December 2005)

Julia.

I think we are a rare breed---infact I think at our age we have earned it!
Bugga.

I have just one comment which may have you pondering.

There are times when you should not be long in a stock just as there are times you shouldnt be long in a market.
These times may or may not align.

I have shown testing that long methods are more profitable if you stand aside from trading them in Bearish moves (Quantifying a bearish move or period is much harder).That is exit all positions
In reality exiting one of my own portfolios in May cost me dearly in Tax which I hadnt factored into my testing--Bugga again!!

Maximising any portfolio is the next challenge if you can invest or trade profitably.

To me Technical analysis is the tool best used.
There are many ways this can be achieved.(Maximising Portfolio profits).
(1) Maximising position sizing in "Movers" 
(2) Decreasing position sizing in stalling stocks or decliners still trading within a systems parameters.
(3) Identifying times NOT to be trading long.
(4) Free trading profits.
(5) Looking outside your backyard.(Trading other bourses and markets,commodities/stocks.) Technical analysis makes this possible without an indepth knowledge of that being traded.


Can anyone add any more?
Appears like a few others I'm a drip under pressure (an EX spert)


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## wayneL (8 December 2005)

Julia said:
			
		

> So, given the above,  would you (or anyone else who wants to offer their 2c worth) say TA would materially alter my profitability?




I would say not. Fundamentals are the go for long term,  low time input, investment.

In fact companies like NAB and so on...the blue chips... are nearly impossible to trade and beat long term holding given equal position sizing.

A trader is either looking for something more volatile, or cranking up leverage on slower movers (Taking care not to break money management rules !!!!!!!!!!) 

If I had an altennative income, I would either do it your way or Techs way. (but co. reports make my eyes glaze over  :goodnight  ) 

But even a trader should have some sort of long term portfolio in place, either in shares, property or sumth'n.

Tech



			
				Tech/A said:
			
		

> If I ever do trade for income then it will be longer term and fully capitalised,not buzzing in and out.
> I personally believe that MOST "traders" trade quickly in and out as they cannot capitalise trades to an extent that would allow a different more passive style.




Paradoxically, it has nothing whatever to do with capitalization, unless there is a lack thereof, because:



			
				Tech/A said:
			
		

> There are times when you should not be long in a stock just as there are times you shouldnt be long in a market.




In commodities markets this point is so blatantly obvious that it is rarely mentioned.

I the stock market this point is so feared that it is rarely mentioned

In the stock market, I think that time approacheth. (When, I have no idea, but there will always be a bear lurking around somewhere) Even Buffet, has intimated that he believes this to be inevitable.

The mathematics of long term trend following does not favour short selling in stocks. As someone who trades for a living, short selling is a necessary strategy for continuity of returns. Th 25-30% drawdowns with long term trend following are NOT an option.

Looking back at my results for this calendar year. It would have been a very ordinary year indeed, if it had not been for my short sold profits. The US market has not had the bull run the ASX has had.



			
				Tech/A said:
			
		

> For me its simple.
> 
> I take control of my decisions,I keep trading simple and I know the Numbers.
> I track NUMBERS.




Indeed! And this is exactly the point. The full time trader has to skew the numbers in a slightly different way. Part of this is psychological of course. 

But the way I want the number to work is this: I would prefer _x_ at the end of every month rather than 24 * _x_ at the end of 2 years.

Thats my reality, so I trade to it.

But it is a folly to inflict my reality on someone else.

Cheers


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## mit (8 December 2005)

michael_selway said:
			
		

> Depends what u consider rich!
> 
> Whats your NET GAIN before any taxes in shares so far, excluding dividends & interest foregone, but including Brokerage Charges




I was being a little tongue-in-cheek. Why exclude dividends? My main $ return is from a dividend system so not including the benefit of the tax credits, dividends form about 30% of my profit.

Also $ returns don't matter % returns are what matters, its how well you use your money.

MIT


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## tech/a (8 December 2005)

mit said:
			
		

> I was being a little tongue-in-cheek. Why exclude dividends? My main $ return is from a dividend system so not including the benefit of the tax credits, dividends form about 30% of my profit.
> 
> Also $ returns don't matter % returns are what matters, its how well you use your money.
> 
> MIT





Hmm

30 % in dividends then a nett return of around 10% P/A on investment.

Not much room for a down turn.


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## mit (8 December 2005)

tech/a said:
			
		

> Hmm
> 
> 30 % in dividends then a nett return of around 10% P/A on investment.
> 
> Not much room for a down turn.




Eh? I hold for around 35 business days. So I turn over my capital 7.1 times a year. I only take dividends that are 2%+ so at a minimum my Dividends are 14.2% of the total position. I use margin lending at 60% LVR so 100/40 * 14.2%
which is 35% return on my input capital for Dividends alone. Which is nice in itself but my capital also increases and don't forget all those lovelly franking credits..

MIT


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## tech/a (8 December 2005)

mit said:
			
		

> Eh? I hold for around 35 business days. So I turn over my capital 7.1 times a year. I only take dividends that are 2%+ so at a minimum my Dividends are 14.2% of the total position. I use margin lending at 60% LVR so 100/40 * 14.2%
> which is 35% return on my input capital for Dividends alone. Which is nice in itself but my capital also increases and don't forget all those lovelly franking credits..
> 
> MIT





That explains it.Thanks


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## mit (8 December 2005)

tech/a said:
			
		

> That explains it.Thanks




not a problem
MIT


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## michael_selway (11 December 2005)

Julia said:
			
		

> The reason I bought it back is that I regretted selling it.  (I can hear you blokes out there sighing and saying "bloody women!".)  This is something I've never done before but on honest reflection realised I had made a mistake. I  am quite happy to admit the mistake and correct it by buying more shares.
> 
> Weren't there other shares at the time that I thought had better potential?
> No.  With the exception of very speculative ones which don't interest me these days.
> ...




Hi well looking at hindsight, there may have been better opportunies than RCD at that point in time (28/11/05 for 8.40), eg TBC, MGQ, ZFX, just to name a few. Maybe more as time goes by

Yes also maybe u should have bought more per stock earlier so now u dont end up with heaps of stocks with lower amounts in your portfolio which may lower your average gain (although diversification is very important, just do over do it) eg RCD maybe buy 4000 instead of 2000 as you said in Oct 04 for $4.96


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## Julia (11 December 2005)

michael_selway said:
			
		

> Hi well looking at hindsight, there may have been better opportunies than RCD at that point in time (28/11/05 for 8.40), eg TBC, MGQ, ZFX, just to name a few. Maybe more as time goes by
> 
> Yes also maybe u should have bought more per stock earlier so now u dont end up with heaps of stocks with lower amounts in your portfolio which may lower your average gain (although diversification is very important, just do over do it) eg RCD maybe buy 4000 instead of 2000 as you said in Oct 04 for $4.96




Michael,

I am deeply indebted to you for taking such a persistent interest in my investments.

However, I would point out that what may seem like "better" opportunities to you may not necessarily fit into my investing criteria, one of which is a good and reliable yield.


For example in the stocks you mention:

TBC:  Simply just not "up there" with the stocks I want to be in.
         With a dividend yield of 3% it is well below the sector average of 4.9%.

MGQ:  There are other property trust type vehicles with much better yield  
          than 4.5% - the sector is 7.2%.

ZFX:   I do not want any more resource stocks in my portfolio.

RCD:   (the stock which seems to have attracted so much of your interest)
          I'm quite happy with 2000.
          It has a dividend yield of 4.1% compared to the sector at 3.7%.

Julia


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## michael_selway (12 December 2005)

Julia said:
			
		

> Michael,
> 
> I am deeply indebted to you for taking such a persistent interest in my investments.
> 
> ...




Hi Julia, im kind of newish to investing so just curious about many ideas people had etc 

Yep, those stocks i mentioned were ones that performed better than RCD since 28/11/05, but obviously in the further future who knows

Btw do you (or others) know any other shares that have pretty good sustainable yield compared to their sectors averages?

Thanks


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## Julia (12 December 2005)

michael_selway said:
			
		

> Hi Julia, im kind of newish to investing so just curious about many ideas people had etc
> 
> Yep, those stocks i mentioned were ones that performed better than RCD since 28/11/05, but obviously in the further future who knows
> 
> ...




Michael:

I guess we all have different investing philosophies depending on our goals, investment capital, age and a variety of other factors.

I'm not interested in what a bunch of stocks do during the course of a couple of weeks, rather what they will do in a couple of years.  Obviously the short term trader is going to take the opposite stance.

ASF guidelines suggest we don't " offer advice " on the forum for good and obvious reasons and I wouldn't be comfortable anyway making any recommendations on shares, whether for their yield or anything else.

See your PM's.

Julia


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