Stock Portfolio Management: Without It Losses Are Inevitable

It All Starts With Good Stock Portfolio Management

Updated March 2023

Without a good plan, you are bound to lose:

These suggestions are here to help you become a better trader. As you get better, you may find that some of these suggestions no longer suit you. That’s just fine, find what works best for you.

One good tip is to take some profits off the table from time to time. Do this in a calm and collected manner. Choose a profit target, like a third or half of your holdings. Start with a goal of a 20% gain, but don’t be afraid to aim for more, like 40% or more. When your stock reaches a 40% gain, sell a third of your shares, it’s that simple.

Next, always be prepared for those unexpected mouth-watering opportunities! It’s wise to keep some money aside, just in case. For those who play it safe, make sure to have at least 25% of your investments in cash when the market is looking a bit heated. You’ll know this when the monthly charts show that technical indicators, like the MACD, stochastics, and RSI, are in overbought territory. It’s a good idea to start building up your cash then until you’ve got a quarter of your holdings in cold hard cash. That way, you’ll be ready for anything that comes your way.

Crucial Points To Remember

Divide your investments into equal parts and put the same amount of funds into each. Always keep some money aside for unmissable prospects.
When the market is overheated, conservative investors should aim to have a cash reserve accounting for 15% to 25% of their portfolio.
Decide on a profit target of no less than one-third of your investment, with a preferable goal of half. Stick to this target unwaveringly.
Set a clear limit on your losses by determining a stop loss of 20% to 30%, with an average of 25%.
Exit the position immediately when this stop loss is triggered, don’t adjust it with the hope of recovery.
If a particular investment doesn’t seem to be paying off, make a decision whether to stay in or sell and switch to another option.
Set achievable goals and refrain from venturing into options until you have a solid grasp of the market. The exception to this rule is selling cash-secured puts and covered calls

Portfolio Management is discussed in more detail here.

Commercial News

News, oftentimes, is seen as little more than a trifle, for it is frequently stale upon its release to the public. Furthermore, an abundance of folks have access to the same information, making it challenging to hold an advantage. However, if one is able to gaze deeper beyond the facade of the news and scrutinize the fundamental tale, it may prove of some worth. Moreover, commercial news sources may furnish intelligence on what actions to steer clear of and the market sentiment, which can signal the peaks and troughs of the market

While news and events can have an immediate impact on the market, they are usually short-lived and have a limited effect in the long term.

As such, it’s important to not base one’s investment decisions solely on news and events, but rather on a more comprehensive analysis of the company and its prospects. This involves analyzing financial statements, industry trends, and other relevant data to form a well-informed investment thesis.

Moreover, it’s also essential to consider the source of the news and its credibility, as well as its potential biases. Many news sources have an agenda, and it’s crucial to be aware of this when interpreting the information. Additionally, it’s essential to be cautious when acting on breaking news, as it is often subject to revision and can contain errors or inaccuracies.

While news and events can provide valuable insights and information, they should not be the sole basis for investment decisions. A more comprehensive and data-driven approach, along with a critical evaluation of the source and credibility of the news, can lead to more informed and successful investment decisions.

Fundamental Analysis

He who understands the causes of things will do better in a future state of things than he who merely understands the things themselves.

Indeed, if everyone draws the same conclusion from the information available, it can lead to a lack of an edge in the market.

In order to truly thrive in the realm of trading, it is imperative to adopt a more nuanced approach. While fundamentals play a crucial role in understanding the underlying value of an asset, relying solely on them can lead to a rather limited perspective. In a world where information is readily available, it is crucial to consider other elements that can contribute to market movements.

The integration of technical analysis is a key component to achieve a more complete picture of market trends and identify potential trading opportunities. The use of technical indicators and chart patterns, along with an understanding of mass psychology, can help traders better anticipate market movements and make informed decisions.

Moreover, a well-structured portfolio management plan is an absolute must for long-term success in trading. This includes diversifying investments, setting clear risk management strategies, and continuously monitoring and adjusting the portfolio as the market evolves.

A combination of fundamentals, technical analysis, and effective portfolio management is essential for traders who seek to gain a true edge in the market. As the famous philosopher Mr Spinoza once said, history has repeatedly demonstrated that the masses are never on the winning side. By utilizing a multifaceted approach, traders can strive to overcome the limitations of a single-dimensional perspective and achieve greater success in their trading endeavours.

Peter Spinoza has some sage words for newbies.

Paraphrasing the wise Philosopher Spinoza born in 1634, “those that try to show others the light are usually sorely in need of this light” or as Johann Wolfgang von Goethe born in 1740 who had the following to say. “I find more and more that it is well to be on the side of the minority since it is always intelligent”. Or William Stanley Jevons born in 1853 “ As a general rule, it is foolish to do just what other people are doing because there are almost sure to be too many people doing the same thing.”

Technical analysis

This is the only area that can provide an edge if appropriately implemented.

Technical analysis is the art of discerning market trends through the examination of charts and statistical data. While it may seem that relying solely on technical analysis can provide an edge in the stock market, it is important to remember that it is not a foolproof method. The markets are constantly shifting and evolving, and what may have worked in the past may not necessarily be applicable in the present.

That being said, those who are able to master the technical analysis techniques and adjust their methodologies accordingly can indeed gain a unique perspective and potentially make well-informed trading decisions. But as with any tool, it is crucial to use it in conjunction with other tools such as Mass Psychology, rather than relying on it solely.

It is also worth noting that many traders and investors alike tend to cling to standard settings, failing to recognize that these settings may not always accurately reflect current market conditions. To truly gain an edge, one must be willing to adapt and recalibrate their approach as the market dictates. In this game of financial speculation, it is not enough to simply observe – one must be able to act on their insights and make calculated confident decisions. Adapt or die; there is no in-between when it comes to trading. This article provides insights into why “mechanical systems fail”

Effective stock portfolio management can make the difference between winning and losing.

Mass Psychology & Inductive Thinking

What if the facts presented to you are faulty or, worse yet, fake? Then, no matter how thorough your analysis, the result will be flawed. Sol Palha

Mass psychology can be a veritable weapon in the stock market arena if wielded with acumen. By comprehending the emotional forces that steer the multitude, one need only bide their time until the fervour reaches a crescendo, and then shrewdly shift their stance.

Conventional contrarian investing, on the other hand, too often rushes to adopt a posture that is antithetical to the herd, resulting in premature entries and a lack of tenacity to endure.

Or expressed in another way

Mass psychology plays a crucial role in the stock market. By understanding the emotions that drive the masses, you can make informed investment choices. A smart strategy is to observe and wait until these emotions reach a peak, and then consider reversing your position. This approach is more effective than simply taking the opposite stance of the majority, as it requires patience and a clear understanding of the emotional landscape. So, embrace the power of mass psychology, and let it guide you towards successful investments.

On the other hand, inductive thinking is when you observe patterns in the market and use these observations to make predictions about future trends. Technical analysis is the perfect example of inductive thinking, where you observe past market trends and use that information to make predictions about the future. This way, even if the information you have is not 100% accurate, the patterns and trends you observe will still provide valuable insight into the market.

It’s important to remember that technical analysis should never be used in isolation and must be combined with other analysis methods such as fundamentals and mass psychology. When all these methods are used together, they provide a comprehensive view of the market and improve your chances of success in trading.

Technical analysis can provide a valuable edge in the market, but it should be used in conjunction with other analysis methods (Mass Psychology, Geopolitical factors, etc) and a well-structured portfolio management plan. With a bit of practice, patience and discipline, one can become an expert in this field and succeed in the markets

Inductive Thinking is both overlooked and under-appreciated

Here you search for the facts and then use these facts that you obtained from your observations to draw a conclusion and determine a possible outcome. Sol Palha

Inductive thinking is a superior way of approaching the stock market. It involves using your intuition and observations to draw conclusions and make predictions. Unlike deductive thinking, which relies on established theories, inductive thinking allows you to see patterns and connections that others may miss. This is because it requires you to be more present in the moment and engage a higher level of your mind.

The best time to keep a trading journal is during a market crash. You will be amazed at the data you can glean from your notes months and years later. Sol Palha

However, many market participants struggle to understand and effectively use inductive thinking. They often fall into the trap of believing they need to spend countless hours reading stock trading books and working hard to improve their skills. Instead, they should focus on observing market conditions and keeping a trading journal during volatile times, especially during market crashes. This will allow them to gather valuable insights and make informed decisions.

The key to successful investing is to be cautious when everyone else is confident, and vice versa. Understanding mass psychology is critical to this approach, and we can help you fine-tune your understanding of this powerful too. We can assist in this arena because mass psychology is integral to our analysis.

What we focus on at the Tactical Investor

“Our attention is centred on the collective behaviour patterns of the general population, known as the mass mindset. It is this mass mindset that holds the key to unlocking the secrets of becoming a successful investor.

We believe that personal growth and success in the stock market are linked. Before we can walk or run, we must first learn to crawl, and before we can crawl, we must have the desire to do so. The same goes for investing. If you seek change and success, you must first have the desire for it and then understand that change requires effort. This effort involves breaking away from old and faulty beliefs and reprogramming your mind to embrace new and effective concepts.

So, if you’re ready to take control of your financial future, let us be your guide on this journey.

Mainstream media focuses on Brainwashing instead of educating.

Idiots are forever clamouring for attention while the wise desperately seek to avoid it, for they know their efforts are best directed towards seeking more knowledge rather than wasting time basking in the light of false glory. Sol Palha

Your mind has been programmed for years to accept what is widely accepted as truth. At TI, we don’t believe in blindly following so-called experts. Instead, we view every individual as equal and don’t hold anyone in high esteem. This includes us, as we believe that no one has all the answers.

However, we have great respect for those who have come before us and some who are currently making a difference. These individuals acknowledge their limitations and are always eager to learn and grow. On the other hand, those who seek attention and claim to know everything are simply seeking false glory.

The wise among us strive to avoid the spotlight, knowing that their time is best spent seeking knowledge. So, let us break away from conventional thinking and embrace a growth-oriented mindset.

Final thoughts

In a world where information is at our fingertips, many believe that news holds little value, often stale and accessible to many. However, those who possess a discerning eye can unearth valuable insights by delving beyond the surface level of news and comprehending the underlying narrative. Moreover, news sources of a commercial nature can provide a glimpse into market sentiment and actions to be avoided, thereby providing indications of market highs and lows.

But here’s the thing, this is where the contrarian view comes into play. As more and more individuals begin to capitalize on the news, market moves have become more pronounced. Unfortunately, inexperienced traders tend to be caught off guard when a stock suddenly spikes or dips beyond its expected mark. One must be willing to recalibrate their approach to stay ahead of the game. This doesn’t necessarily mean overhauling your entire strategy but rather tweaking your settings to keep pace with the ever-evolving markets.

The key area of recalibration is one’s mindset. The markets are prone to overshoot their targets upwards and downwards due to heightened volatility. Rather than resist this reality, it is essential to embrace it. The adage “Adapt or die” has never been more apt. In this arena, there is no middle ground. Understanding why mechanical systems often fail is crucial, as outlined in this article. By doing so, you’ll be one step closer to having the edge over those who rely on standard settings.