A few weeks ago the S+P 500 went below it's 200 DMA and stayed there for a few days before starting this current rally. At about the same time the dollar started a big rally of it's own.
So the combination my taking a little off the table with domestic and the lag in foreign caused my accounts to lag for a little while. I wrote at some point I would be happy with capturing some of the effect for awhile which has been the case; capturing some but with a lag.
This happens to professionals, this happens to do-it-yourselfers. It is a part of investing. Short little spikes that go against you will likely lead to chasing heat with a bad outcome if you give in to emotion.
Over the last few weeks I have had quite a few holdings go up a lot which has really helped out. I don't credit good stock picking but proper diversification. The moves in the S+P and the dollar have been very pronounced. I would expect any diversified portfolio to have a few stocks up much more than the broad market.
A couple of the movers have been otherwise dead money for a while. Most diversified portfolios probably have a few of these as well. This gives good lesson about not giving up on something just because it has been boring.
This reiterates my belief about doing most, not all, portfolio planning ahead of time when you are not in an emotional state.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
6 comments:
I'm curious, why get out at all just because the S&P 500 drops below its 200 DMA? I looked at a chart, and the times it has done this before represented good buying opps.
However, I don't manage money for other people. Maybe you are right.
down a lot starts with down a little. the 200 DMA is a simple market related indicator. The last few times support has been just under. By and large it works for support and resistance, give or take.
Aye, if you don't have a set point, then when do you lighten up. From '95 to 2000, everyone bought at the 200 day average. It worked fine. Everybody was a trading genius overnight. That is until the market kept going one time....and people...the new experts...waited because they knew, they KNEW mind you, that it was going right back up. Except it went down for 3 yrs. Many never did get out because they had no "non-emotional" out point.
Roger, do you look at charts in your portfolios? Don't you think that might help out with your stock picking process?
Well, let me put it this way: I don't see anything either micro or macro that would lead me to believe the market is headed for a crash. So, if that is the case, why wouldn't it make sense to increase exposure when S&P 500 drops below the 200 DMA? On the other hand, if you are really expecting some sort of market correction at this point, then selling makes sense. Is this what you expect? Based on what? That's all I'm saying: I don't agree with selling (or buying) based on technical indicators alone.
Mike, I have been stopped out of a lot of good stocks, that made a quick low only to move on upward for years. But....having done that, if one followed "the method" of selling below the 200 DMA, you would have gotten out early in 2000...and kept all the money you made from 1998..
Post a Comment