Börsipäev 3. august

03.08.2005 17:36

Rev Shark:

Timing's for Comics; Stick to Good Money Management
8/3/2005 8:51 AM EDT

"You win battles by knowing the enemy's timing, and using a timing which the enemy does not expect."

-- Miyamoto Musashi

The market will pull back. But that isn't much of a prediction useless there is some precision to the timing. The one great absolute of the stock market is that we have alternating cycles of strength and weakness and a lot of folks make their living try to predict when the shift might come.

But good market timing is not a purely objective exercise. Yes, it is nice to catch the exact moment the market reverses but timing is also a function of your individual portfolio. When you have big gains the right approach may to be more conservative and anticipatory in your timing. A defensive approach may not correspond with the exact top in the market but it may be the best approach if you have had good success and want to maintain your returns.

At other times you may want to be much more aggressive in your approach to the market as you try to maximize your gains. If you have been trading well and racking up the gains you may want to risk staying at the party too long so you can suck every last penny out of the move. If you are a bit late and give back some gains, that will be more than offset by the additional profits you made by staying aggressive late in the game.

Timing the market is always tremendously difficult but it can be a little easier if you simply use good money management in your portfolio. If you take profits regularly and cut losers quickly you will have engaged in a certain amount of market timing automatically. If you get caught the wrong way when the market changes direction you will have a cushion to soften the blow.

The folks who write about the market (like me) spend an inordinate amount of time trying to predict which way the market is going to move, but in most cases it is good portfolio management that will determine your success. Calling a market turn once in a while may make you a media hero but good money management over a long period of time will make you rich.

We have a rather sleepy morning so far. Crude oil is moving up again and has set a new record high. Overseas market are mostly negative. The dollar is struggling and gold is up.

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