? BUY, SELL, HOLD, WAIT, TRADE ?

Buying and selling stocks and bonds seems simple enough. Just place an order with your friendly neighborhood brokerage and you’re either In or Out. Unfortunately, human nature dictates that most of us seek a bargain even to the point that reality is temporarily brushed aside. Take for example the observation that many people will drive to the gas station with the lowest price even if it is across town, just for a better deal. There must be some psychological benefit derived by this as most of the facts are ignored. Not only are you wasting a little gas getting there but what about your time. Time is one thing you can never get back. The 24 hour cheque we get at the start of each day must be spent - there is no option to save. Something few people pay attention to is the real downside risk of driving a distance for a fill. I am referring to the risk of just being in your car on busy streets. Road accidents kill about 1.2 million people each year worldwide and injure many (~40 times) more. Just think of the annoyance of having to get your bumper fixed, again time and money. Opportunity lost.

Enough about the road though. Verbally speaking, Asset Investment Actions can include BUYING, SELLING, HOLDING, WAITING AND TRADING. I include waiting as an action as it usually takes considerable active brainpower to sit on one’s hands and wait, especially when you have made up your mind to buy something. Think of your last TV or computer or vehicle purchase. Pretty soon you just have to have it! How could you have lived without IT? BUY, SELL, HOLD, WAIT OR TRADE. Seems simple enough but we (collective we, meaning me) try to finesse the actions in order to get the best deal or achieve the best possible return.

Market timing becomes an internal battle for most of us. The disciplined minority have developed their own personal system and stick with it usually through thick and thin. Look as some of the Value managers taking a beating over the past 10 months yet some even stick out their head in public. Kudos to them. So how do the rest of us achieve success? By finding a system that suits our personal tolerance for Reward and Risk. This is personal and those questionnaires by your financial advisor just doesn’t cut the mustard. Risk and Reward tolerance is situational and changes with age and personal status.

My strategy is to create my own Equity Allocation model and stick with it. In broad terms I intend to satiate all of my strengths and challenges. My model includes all of the actions - I will Buy, Sell, Hold, Wait AND Trade.

How to do this? By allocating a certain proportion of my annual investment savings to each arm of the Action model. A proportion is going into index ETFs via regular deposits (’Dollar-Cost-Averaging’ through Canadian Shareowners) to Hold. Another slice is buying Blue Chips which will be used later for Trading (Options) but I will certainly Hold a portion of these Blue Chips for the long haul. I will evaluate my holding every 6 months for Sell signals and hopefully bow out when Mr. Market overvalues any of my holdings. Lastly, a certain portion will be kept in cash, Waiting for the opportunity to Buy. The portion of my investment dollars will certainly change as I get older but the Action Model will not as it satisfies my investment needs and hopefully returns. My Goals and Targets have been set for several years and I continue to march towards each of them.

Many choices and that is the beauty of a free market. We make our own bed and have to sleep in it. In the long-term Buy and Hold makes the most sense but why miss the opportunity to Sell high? You can always Buy back on the swing.