Single asset investments

[yonnie]

its amazing how we all? like to search for new shares to buy every day and spend thousands of hours researching everything for that golden trade.

We all know about the economic clock: share markets are rising, top and cool off and then the housing market start to go up.

In stead of diversifying, wouldn`t it be better to invest all your capital in the market that is rising (with a stop loss) with futures or other products to get maximum leverage.
When that market is cooling off, you put your capital to work in a rising market.

Now I know the main assets are shares (which are up and up) and property (must be the residential property, which is down).
So those 2 complement each other and maybe some-one can think of other assets that would fit at other times of the economic clock?
You would need a bench mark to see which asset is rising/falling ofcourse.

In this way you can invest to the hilt and just sit back and relax and see your money grow.

anybody knows about a book on the subject?

 

[yonnie]

we are so busy with the details, that we forget about the big picture

 

[tech/a]

Totally Agree.

People make trading very complex.
All you need is 1 (ONE) out performing share and chances are you'll make 50-100% on that in a single year!!

No I dont know of a book.
But would love to know the implications of cycle tops and bottoms on other commodities upon other Commodities.
Currencies/inflation/gold/silver/housing/stock market/etc---you get the drift.

 

[yonnie]

Totally Agree.

People make trading very complex.
All you need is 1 (ONE) out performing share and chances are you'll make 50-100% on that in a single year!!

No I dont know of a book.
But would love to know the implications of cycle tops and bottoms on other commodities upon other Commodities.
Currencies/inflation/gold/silver/housing/stock market/etc---you get the drift.

hi tech,

to put all your money in 1 stock would be a bit risky and I for one would be looking for a bigger market which will be more stable although the returns will be less.
but we can alter that by having maximum leverage.
I hate to think what my profits would be today if I had invested $ 100,000 in futures on the ASX200 in 2003/2004.

Likewise I find commodities a bit thin too, nothing like a share market or property.
Although now I think of it, you do have a trading vehicle with all the metals in it.
It would smooth out individual price changes in copper, zinc etc.

I hear that currencies can also trend for years.

So yes thats what we should be looking for:
big markets that trend for years on end, jump in as soon as we`re sure that a new trend has started and sit back and relax. Just trade once a year if that.

 

[Broadside]

Totally Agree.

People make trading very complex.
All you need is 1 (ONE) out performing share and chances are you'll make 50-100% on that in a single year!!

No I dont know of a book.
But would love to know the implications of cycle tops and bottoms on other commodities upon other Commodities.
Currencies/inflation/gold/silver/housing/stock market/etc---you get the drift.

I think limited diversification is a much more prudent strategy. All your eggs in one basket - no matter the trend, no matter the fundamentals or techinicals - there is always the potential to get hit from left field by something no one saw coming.

 

[yonnie]

I think limited diversification is a much more prudent strategy. All your eggs in one basket - no matter the trend, no matter the fundamentals or techinicals - there is always the potential to get hit from left field by something no one saw coming.

sorry broadside, but I for one dont believe in diversification. maybe I`m a bit of a gambler, but on the other hand I sure would be finding a way to hedge my position with a stop loss or whatever.
Diversification is for people that want mediocre results or cant sleep at night.
I`ve had losses of 25 grand in a day in the past, but I didnt lose any sleep over it. The only thing I do differently nowadays is to hedge my position or get out quickly and let my profits run.

 

[yonnie]

googled asset classes and one said:

stocks/property/natural resources/precious metals/currency.

well that should be enough for a start and you could possibly enter when the price of that particular market is
the high of the last year or 6 months or something like that. not too soon, because we have to be convinced that the new trend is really underway. any ideas?

commercial property would probably be in step with the share market, so that might not be an alternative.
so I suppose it should be residential property that has no correlation to the share market.
now I`m not willing to own a residential property outright
so how would I be able to invest in this market?

 

[Broadside]

suppose you you use the criterion you have suggested, invest in one asset class and it languishes for 2 or 3 years, as can often happen. It's fine in theory to put all your eggs in one basket when you assume you put them in the right basket.

 

[yonnie]

suppose you you use the criterion you have suggested, invest in one asset class and it languishes for 2 or 3 years, as can often happen. It's fine in theory to put all your eggs in one basket when you assume you put them in the right basket.

yes broadside, let me stress something from your earlier post. Yes, i agree with you that anything unexpected can happen from the left field and I am not so careless as I was in the olden days.

People in general in these forums dont seem to think much
of the unexpected and when I bring up the subject of hedging they think I`m too old and should be in an old people`s home.

But the saying goes: there are bold traders but not old bold traders

And yes the market I would be invested in might be going sideways for years, but I certainly wouldn`t be keeping my money there for those years.
I would imagine that I have at least 5 markets to choose from and the market with the most momentum will get all my money with stops and a hedge if possible.
So I might get it wrong sometimes but lets face it, nobody is right 100% of the time.

I would just have to find markets that dont correlate with the share market.
I suppose the natural resources go up as the economy starts to go up.
Same for precious metals: booming economy - people want jewellery etc

Maybe have to go for the agricultural futures, although they are too volatile and behave like individual shares.
Not a steady trend by any means.

Have to keep looking i suppose

 

[Broadside]

I don't know if you read HC as well yonnie but yellowcake is a massive bull on agriculture, grains etc - as a long term trend. Could be worth a read. I do tend to think we are at or near the top of the stockmarket and switching some money into another asset class could be prudent, obviously a lot of money is flowing into the top end of the real estate market, would say a huge amount of that is newfound wealth from shares. Doubt it will reach the "average" residential property market. The stock boom and bust 1987/89 was followed by a property boom but we've already had that, not sure things will follow the same path as before.

What sector do you think is best insulated from a tightening of liquidity / rising interest rates / a debt bust? I am not all doom and gloom but do believe there is far too much leverage in the system. Cheers.

 

[CanOz]

I think limited diversification is a much more prudent strategy. All your eggs in one basket - no matter the trend, no matter the fundamentals or techinicals - there is always the potential to get hit from left field by something no one saw coming.

What he's talking about is having a trading strategy that lets your odds of finding such a stock be the highest possible. If you can spread out your capital, sooner or later you'll hit a multi bagger, then you just have to stick with it. Tech Trader has hit a few!

Cheers,

 

[yonnie]

well broadside,


the real estate market has had the good years a few years back, now is the time of the share market and when that turns to dust, residential property will come up again.
For now you dont know how long the good times will roll on and its anybody`s guess.
Why not let the market tell you when to get out so that you dont miss out on good profits.
Myself I would place stop losses and when they get hit, you have a pile of money.
Those sectors that weather the downturn better, would also have come down and you can buy them cheaper then, than if you would buy them now.

which sectors are good for weathering the downturn I dont really know. I would be out and look for something else.
It has been said that we still got to eat, we still use the phone/power/gas/water and we even still gamble........so take your pick.

 

[Smurf1976]

Buy when cheap and nobody wants it, sell when expensive and everyone's talking about it and ignore the noise along the way.

A lesson that cost me quite a lot before I finally realisd that trading in and out of an ongoing bull market and paying tax along the way wasn't doing me any good.

 

[yonnie]

so what would you buy right now smurf?