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I make investing easy even for folks on vacation.

April 21, 2010

Please go to Google and type in “Portfolio Management.” Actually, type in any question about any  rule or concept with regard to investing and you will be shocked. Psychologists came up with the Rule of Parsimony a 100 years ago realizing that human beings tend to describe or explain anything with many more words than is necessary. People killed Occam’s razor, making life itself more complicated than it is!

Life is simple and wonderful. Here is my example for investors to follow:

Let’s say that you are going on vacation and you can’t manage your portfolio when you are hiking in the mountains. You go to a week before you leave and to your chagrin you find out how complicated investing life is! You get page after page of “stuff” when all you wanted was a simple “stop-loss rule” in case the market went down when you were away.

Since you are one of the smart folks that follow my blog, you visit me and discover that the Law of Parsimony is alive and well” in a behavioral investing. Sample Stop-loss order (SLO), “Mr. Jones, please sell from my portfolio a 1000 shares of AAPL if the price goes down below $220 (This is a SELL-HIGH strategy designed to protect your portfolio during your vacation when you are not checking the market. You bought at $100 and the current price of a share is $240).

You spent $10,000 in Europe and when you come back you wanted to learn how to make more money. You Waited till I came back from my vacation in June and you learned the other 2 simple rules that together made the grand rule of investing that I call BLASH!

2 Comments leave one →
  1. Noah permalink
    April 23, 2010 8:10 am

    Hi Elior, just wanted to let you know your link to investopedia is not working. I believe you are missing an O.

    Logical stop loss placement, and knowing how to strategically exit positions is perhaps one of the most important and overlooked principals in trading.

    I personally use a component of the instruments price variation over time period N to construct a dynamic stop which expands and contracts depending on market conditions.

    • April 26, 2010 1:06 pm

      Hi Noah,
      This is what friends are for. Thanks. I corrected the missing “o.” If you are in town, come to the investing club meeting tomorrow 7-9 PM. Meetings are every other Monday. Tomorrow topic, “potfolios.”

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