So, a few days ago the online broker that I invest with (Questrade) hosted a webinar led by a guy from Vectorvest introducing an investment strategy he called the "10 Minute Investor." Though a large part of the webinar turned out to be a sales pitch for the Vectorvest platform, he did provide a basic investment model (which is supposed to simplify and speed up investment decisions, hence the "10 minute" part), though I'm not sure how solid it is. Here's what it amounted to:
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Know when to sell: Don't keep stocks that are going down. Buying the dip or dollar cost averaging is risky. When stocks are going down, they typically continue to drop. So, set a stop loss on all investments to minimize risk (he recommended you only risk 1% of total portfolio on each trade, and set a stop loss accordingly). Also, conversely, sell when you've reached your profit target.
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Know what to buy: Go for stocks that are rising in price, rising in earnings, rising in value (ie. when stock is undervalued). I asked what time-frame to consider trends and he said he starts with a year. I also asked about how to calculate value, and he said that vectorvest has their own calculation that you can see on their platform--here's where things became kindof sales-pitchy, but probably in principle you can apply your own calculations.
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Know when to buy: When to buy stocks depends on the health of the overall market. Need to take advantage of market direction. When stock market drops, stop buying, tighten stocks, sell positions. When it starts going up, start buying again. Basically, buy stocks when the market is "green-lit": this is a vectorvest term and it's something that is shown to you when you use their platform, and as far as I could tell it indicates that the market is trending upwards, that day and also over a longer period.
So, does any of this make sense? Some of it seems simplistic to me. It seems like it's making some assumptions about an investor's ability to time the market that might be flawed, for one. And the advice about setting conservative stop losses and his criticism of dollar cost averaging seems to go against a lot of the general wisdom I see online here and elsewhere.
Thoughts?
Submitted February 02, 2017 at 11:46AM by Lamella http://ift.tt/2jHGVAD
