Chris Lau - Seeking Alpha

Sunday, August 30, 2009

How To Work So Hard and End Up Where You Started

We all want to be on the right path and on the right direction for an assortment of things. For many readers who visit my site, it is the desire to be a better investor.

The right direction is achieved by asking the right questions. The questions that many investors are asking are:

Are we still in a bear market? Are we in a new bull market? Is the marketing correcting in September and in October?

Vitaliy Katsenelson, a director of research, is author of a finance book, "Active Value Investing." In the following slides below, Katsenelson asks what I believe is the right question: Are we in a sideways market?

If the market is going to move nowhere, then many tools based on "conventional wisdom" such as buy and hold would not an applicable tool to use in today's market.

The paper concludes with the following points:
  • Be a buy-and-sell investor. Buy-and-hold is in a coma
  • Time(price) stocks through a strict buy-and-sell process
  • Time stocks, not the market: Market timing is very difficult
  • Don't buy for the sake of being invested.
  • Don't lose money by making marginal decisions. In the absence of good stocks to buy, be in cash
  • Increase your margin of safety: Fewer (better) stocks will be in your portfolio
  • Favor dividend-paying stocks (Warning: dividends are part of the analytical equation, not the equation)
  • Look overseas - increases return without increasing risk