Investment Strategy

When I designed and tested the Weekend Investor Strategy, I did so based on the following principles:

Capital Preservation – It takes a lot more work and time to earn money than it does to lose it… so protecting your capital is paramount. But sitting on cash gets us nowhere.
Maximize Returns – When a stock rises, we need to give it room to flex. Stocks don’t travel in a straight line… so we’ll try to hold on to part of our position as it struggles to rise.
Minimize Losses – We can’t be right all of the time… so while we accept losses, we want to minimize them. Therefore, we use stop losses and separate ourselves from toxic positions, even if we love them.
Buy the Rise – So many investors lost money in 2007 and 2008 buying on the dip… when the dip became a black hole. I’d rather buy as the stock begins to rise… even if it means I’m “behind” by a few percent. After all, who can accurately time the “bottoms?”
Put Profit in your Pockets – As a stock rises, we should raise our stop losses to ensure we put the most possible money in our pocket as close to it’s peak as possible. Of course, the dynamic nature of a stock’s price can make this difficult and sometimes cause us to get “stopped out” prematurely. But think about it… that is still profit in your pockets!
Mind the Markets – Recognize when the overall markets are rising, you’ll find a vast majority of stocks are also rising. And conversely, when the overall markets are falling, you’ll find a vast majority of stocks are also falling. Therefore, it’s important to mind the markets… know which direction they are going and beware of trading against the overall trend.
Watch the Weekly Technicals – Daily stock prices are often tumultuous… rising one day only to fall the next. It is this kind of volatile price action that often leaves investors on the wrong side of the trade. Instead, we choose to adopt a Weekend Investor style. Here’s a few characteristics of the Weekend Investor:
- We have jobs and other commitments that occupy most of our time, so we can’t sit in front of the computer and trade all day, nor do we really want to.
- We use an advisor or bank for the majority of our investing… but we want to learn to invest more on our own.
- We’ve seen the faults of the “buy and hold” strategy… it doesn’t make sense to hold stocks while they lose 30% of their value.
- We’re investors, not speculators, so we want to be wise with our money, not merely hopeful.

So far, we’re doing extremely well… and in the next half of the year, we’ll do even better.

This Newsletter is for you… and starting this weekend, I’ll be adding a complete section of US Stocks for investors south of the 49th Parallel or those who want to invest in the US markets.