When to Cut & Run vs When to Double Down Hi
@Mark, I have to say my above example was borderline. But ... Just as Duke Energy "lied" to the North Carolina Utility Commission in their merger with Progress Energy and just hours after the merger they fired the new CEO who was Bill Johnson & CEO from Progress Energy. Mr. Johnson was suppose to run the new company under an agreement with the commission. They replaced him with Lynn Good ... I cut and ran. What a hood wink! And, they got heavily fined. He received a nice termination package and, in time, became the CEO of TVA. I owned shares in both companies. Again, what a hood wink job on the commission. Today, this still lingers in the minds of many folks. Myself being one of them and I think their action back then still impacts their relationship with the commission.
I'd also have to say being light technology by about 9% (I'm
@14%) from its S&P
500 Index weighting (it is @ about 23%) is more than a rebalance. In addition, I'm light consumer discretionary, industrials, and healthcare. I'm overweight materials, real estate, consumer staples, energy, utilities and communication services. I'm about equal weight in financials with the Index.
A normal sector weighting for me in a major sector is 9% with no major being greater than 1
5% or so. For a minor sector a normal weighting for me is
5% with no minor being greater than 8%, or so. This means that there is a sizeable amount (about 17%) that can be spread to overweight sectors from my normal weightings.
Anyway, this is how I roll when it comes to my sector weightings.
When to Cut & Run vs When to Double Down @MJG - Thanks,
Yep - My original post mentioned not being able to identify the author. Later I did learn his name and position with IAG and so corrected that. There were some redundancies I weeded out as well. Apologize for throwing you a knuckle ball. You handled it like an expert.
So Mr. Chisholm graduated from college in ‘99 with an economics degree ...
These young ones - still in college at the height of the 90s boom - really don’t have the same perspective as you, me and some others here who’ve been investing and following the trends for
50+ years since the ‘60s. The inflation of the 70s & 80s, seeing gold soar from $3
5-$
500, the Volcker years, the tech bubble & wreck, and October 19, 1987 all influenced my perspective. Mr. Chisholm did live through the ‘08-‘09 collapse. But I fear the unusually strong and rapid recovery may well have taught him and many the wrong lesson.
A degree in economics is nice. I’d be more impressed with a CFP and a bit more experience out in the field. I probably should not have referenced your source as an advertisement. While it does have some promotional attributes (plugging for his firm) I think the content was well intended. I continue to be a bit agitated when anyone tosses out that corellation between trading frequency and poor performance. While that’s a part of the picture, it’s not the whole picture.
Great biking day here in northern Michigan.
Wishing you good investing.
When to Cut & Run vs When to Double Down “Individuals make decisions every day with their emotions assisting their judgment. It is part of who we are as human beings. Unfortunately making emotional decisions can be a detriment in the investing world. Individual investors who let their emotions guide them have a much harder time investing than people who have found ways to master their emotional decision making. Some investors try to master their emotional involvement by using a rules-based system, others use computers to make the decisions for them, and still others invest in indexes through ETFs or mutual funds. There are many ways to remove the emotional component from investing, but most investors don’t realize that their emotions are the problem. You can read my post about fear and greed investing or investing is not gambling to learn more.”
The link MJG posted is an advertisement for Investment Advisory Group. The writer’s name is Kirk Chisholm. He’s employed by Investment Advisory Group. I’ve noted the qualifications he provided at bottom. No accredited instructions or degrees are listed. No reference to specialized training in either finance or psychology is indicated.
(1) Correlative statistics: The writer cites statistics showing a correlation between poor investment outcomes and frequency of trading (higher trading being associated with poorer performance). I dont think many would doubt that correlation. It’s pretty widely accepted.
(2) Assumptions The writer makes numerous assumptions about the psychology of different investors which (presumably) led to some engaging in higher than average trading. What are the writer’s qualifications re human psychology? It’s a big leap to go from the correlation between trading frequency and performance to the particular psychology which led to that. At that point you’re likely delving into problems like compulsive personalities, low educational attainment, delusional thinking - and quite possibly substance abuse, gambling addiction and dysfunctional families. I don’t know what leads some investors to trade so frequently. I don’t think the author knows either. I’d suggest the he and his firm stick to dispensing investment advice.
(3) Causal relationship - I don’t think he’s demonstrated that convincingly. It is equally possible that those who trade frequently are poor money managers to begin with and would still have found a way to lose money in the markets. Their heightened trading activity might be more a consequence of more serious underlying issues (including financial) rather than the cause of their predicament. So, was the frequent trading the cause of their problem or was it the result of other problems?
Author: Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group (IAG). His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and non-traditional investment markets.
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I liked this thread in general. To me it does not appear to be about frequent trading. I suspect Old Skeet was more interested in that 2, 3 or 5% of an investor’s decisions based on strong conviction for / against a particular opportunity. “Doubling down” is a treacherous path to making money which nearly everyone has previously noted. “Cut and run” references selling a bad investment or fund. If you’ve invested for more than 50 years without ever making a bad investment (one you needed to sell) you are indeed fortunate.
