Wall Street Institutions pay billions of dollars annually to convince the investing public that their Economists, Investment Managers, and Analysts can predict future price movements in specific company shares and trends in the overall Stock Market. Such predictions (often presented as “Wethinkisms” or Model Asset Allocation adjustments) make self-deprecating investors everywhere scurry about transacting with each new revelation. “Thou must heed the oracle of Wall Street”… not to be confused with the one from Omaha, who really does know something about investing. “These guys know this stuff so much better than we do” is the rationale of the fools in the street, and on the hill (sic).
What if it is true, and these pinstriped super humans can really predict the future, why do you transact how you do in reply? Why would fiscal executives of each size and form holler sell when costs move lower, and vice versa? Would this pitch work at the mall? Naturally not. Now lets bring this phenomenon into focus. Not one of those Fixed Experts ever doubts the basic truth that both the Market Indices and individual issue costs may continue to move up and back down, for all time. Hence if we were to slowly construct a diversified portfolio valuable stocks ( My short definition : moneymaking, dividend paying, NYSE corporations. ) as they fall in price, we’d be in a position to take profits in the following upward cycle also for good.
Let’s pretend for a ( stupid ) moment that broad market movements are slightly foreseeable. Without regard for the direction, skilled advice will always fuel the accepted operative emotion : greed or fear! Wall Street’s retail members ( stock brokers ), and the new, net expert, self-directors, barely go against the grain of the feeling opinion particularly the one projected to them by their immediate superior / partner. You can’t get independent thinking from a Wall St salesman ; it just does not fill up the Beemer. Sorry, but you have got to be ready to think for yourself to remain in balance while pedaling on the Market Cycle. Here’s some global guidance that you won’t hear at street level of dreams ( and do not get all huffy till you understand what to buy or to sell as well as when to do so ) : Sell into rallies. Buy on bad news. Buy slowly ; sell swiftly. Always sell too shortly. Always buy too shortly, incrementally. Always have a plan. A plan without buying guidelines and selling targets isn’t a plan.
Presaging the performance of individual issues is a completely different ball game that needs a rather more forceful crystal ball and an entire array of semi-legal and absolutely illegal relations that are often self serving and worthless to average financiers. again, let’s pretend a mega million-dollar income and industry recognition as a mega star creates Master of the Universe quality prophecy capabilities. I’m sorry. I simply can’t even pretend that it is true! The proof against it is too great, and the downsides of counting on analytical viewpoints too real. Nobody can forecast individual issue movements in prices legally, constantly, or in a timely fashion. Confront this : the chance of loss is real ; it can be minimized though not eliminated.
Investing in individual issues has to be done differently, with rules, guidelines, and judgment. It has to be done unemotionally and rationally, monitored regularly, and analyzed with performance evaluation tools that are portfolio specific and without calendar time restrictions. This is not nearly as difficult as it sounds, and if you are a “shopper” looking for bargains elsewhere in your life, you should have no trouble understanding how it works. Not a rocket scientist? Good, and if you are at all familiar with the retailing business, even better. You don’t need any special education evidentiary acronyms or software programs for stock market success… just common sense and emotion control.
The Street sells products, and spins fact in whatever demeanour they feel will produce the most impressive results for those products. The direction of the market is not important to them and it would not to you either if you had a correctly assembled portfolio. If you find out how to deal unemotionally with Wall Street events, and eschew the herd mindset, you’ll find yourself in the right cyclical mode much more frequently : purchasing at lower costs and, as a consequence, taking profits rather than losses.
Coming next: Developing a Value Stock Watch List and Profit Taking Targets.
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