ODDSMAKERS WILL ALWAYS handicap the favorites. But at the start of every baseball season, all teams — even longtime losers — are contenders.
The same early-season optimism can be found in the stock market, where a new quarter brings opportunity in both new names and old favorites.
As the wheeling-dealing gets underway, investors should approach every trade with the confidence of Warren Buffett and the wisdom of a blackjack dealer, who knows that even the best players have plenty of losing hands. Although most people want to slap a “time horizon” on their trades, the truth is that the market should decide your holding period, not emotions or research. Every long-term investment starts out the same way — as a short-term trade.
In my view, an appropriately sized initial position is no more than 5% of your overall portfolio. Once you get your trade confirmation, all the analyst reports and newsletter recommendations become moot. As we’ve pointed out in the past, after the first trade is made, it’s all in the follow through. Your job isn’t to research, but react. (more…)