Join our investing community

Buy and Hold. Moneysense

Discussion in 'Money Management' started by Johny_come_lately, 7th Dec, 2010.

  1. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
  2. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    What're the rules to govern the rules you follow?

    Thank you! It is a good article but I try to use my rule here that is to challenge the rules to turn ourselves the masters of the rules!

    It is right if we assume index would go up and up in one direction for long term but if it doesn't follow our assumption, how could we protect us?

    Could we buy the index when the wall street is full of blood and the chances to be worst is nearly zero? If anyone bought index at the peak before GFC or Great Depression what could we get? Pains only!

    We only could leave our investment alone after we could be extremely happy for our margin of safety! It is the core of the intelligent investors, passive or active!

    We have not to take and use any rules without fully understanding. I fully geared into my geared fund in 2006 with the similar rules the article advocate. After GFC it lost nearly 70%, now about 50%, and still not sure when I could be in a position, no loss. Yes index fund would be less bad than geared funds but if we see the following chart we would know when you buy is very critical!

    [​IMG]

    No loss should be the bottom line before you buy and leaving what you buy alone! What the rules govern the rules you follow?

    Buying for holding forever is right strategically but it is wrong to hold your position when you be sure your money would be in the hell tactically! Without matter what the rules are, they should go to the hell before our money goes to the hell by following them!

    This article just tells the story in half in my view. Anything if just show half could show the perfect but market and world never are perfect!
     
    Last edited by a moderator: 7th Dec, 2010
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    It depends, doesn't it. Would you buy and hold for a housing deposit? Would you buy and hold for a college fund? Would you buy and hold for retirement in 50 years time? Depends.




    Johny.
     
  4. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Just wonder what if our driver are drunk very often

    Yes Johny, we should keep open minds to all to take the right risks in our own time horizon, environment, and our own personal cases.

    So some very serious question just pump up from my head that is could we make good enough money when we always are passive with our hard-earned money from the office and workshop? Could we be passive to be sure the drivers would be never drunk or miscalculate the risks?

    It is a life experience that if you want to check others qualification you have to be qualified first but after you get your qualification, you should be able to put enough money in your bank. If you have enough money in the bank and have the qualification, you may just get a team to work for your dream and contribute more to the society.

    Theoretically I agree the way of the passive investment from "The intelligent Investors" and believe all of passive investors should read this great book. In reality it is after you read the book, fully understand the book, and be the believer of the ways, you would find you have to know more, and then you would not like to be a passive investors anymore.

    So we want to be passive since we don't know enough and after we get enough we could not be passive when the funds just held at the peak in the mania such as what happened in GFC.

    Good things should be overdone and bad things should be cut short. What if you find most of drivers of your funds or the drivers of our economies or the drivers of the market, are drunk? We need to know more than these drivers, right? But could we be passive to know more than them?

    I quit my job mainly because I feel I have to be good enough and I am at my 50s which don't allow me to get into school for the necessary knowledge.
     
  5. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    There are two definitions of 'Financial Independance'

    1. A perpetual stream of income until death
    2. Being in an enviroment where you participate and fulfill your goals and dreams.

    Market indices (drivers) can get drunk and crash as can we. Passive investments can provide a steady stream of income. But reaching my own private goals can be just as fulfilling. And because they are hard, then the satisfaction of reaching them is so sweet.

    Wdongli, if you get enjoyment from trading, that is wonderful. I value being with friends and riding into the sunset, on my motorcycle. Index investing allows me to do just that.

    The future is unknowable. That is why today is so important.




    Johny.
     
  6. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Haha Johny

    Please don't mind what I talk.

    I am a school boy in my self-learning school about the market, since it is a new workshop for my butters and milk. You know the active school boys always confuse themselves and teachers with too many questions.

    In reality simplicity is beauty and has to serve for our life style. Dance on tap to do what we want to do and we enjoy to do. Last weekend I danced for hours in a party of Casino.

    Thank you for your words and understanding!
     
  7. Damoz89

    Damoz89 Member

    Joined:
    8th Dec, 2010
    Posts:
    5
    Location:
    VIC
    Buying and holding is stupid. As soon as you make a return significantly larger than you could get anywhere else you should at the very least be locking in some of that profit. I'm sure people have ridden stocks to the top then straight back down (and beyond!) Even if they got off half-way to the top they'd still be better off.

    The more stupid people in the market the better though, more money to take from them.
     
  8. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Yes, fully agree! Buying and holding is to buy value and growth. You have to buy the value for discount as Buffett said you should get $1 at $0.50 price, which means you should not blindly buy for overvalued shares. You have to hold and only hold the growth which give you the confidence you could get more when the future time moves in bit by bit. If any fad pushes the price far more higher than the value and the growth could give to you, you should sell.

    Buying and holding should be used in philosophical level. That is you try all to buy the value for discount and find all to confirm the future growth is there with great confidence. If environment would not changes against what you buy and hold, the business just as normal, keep giving your the dividends for income and steady price increased. However if the normal conditions for buying and holding is gone, you should get out!

    Actually I believe you should use the sufficient conditions of margin of safety and growths of "buying and holding" onto anything you buy in the market. Good buying should resist against any disastrous effects to your portfolio. It is the idea to force to put the risks up and down, and right and left to checking before your buying.

    Value is elusive and selling could not be done without human emotion. The emotion when the market is hot, is typically greed. If you feel the price is too good to be true to any imagination of the value, it is stupid to hold but sell!
     
  9. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    I have no problem with the concept of selling overvalued shares. It is picking the tops of the market where I have difficulty. Damoz89 or wdongli, did you pick 15 July 2007, 7 Oct 2007 or 11 May 2008 peaks. I rebalance every 3 months between stocks and bonds. This is the only strategy I use to shave down my agressively growing funds.



    Johny.
     
  10. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Hi Johny

    Most of time I failed to identify the peak where I, often than not, was greedy or fearful. That is the reason why I put all of my time to know the risks intelligence as much as I could. In the market, we all fail and win time by time. We all have biases. We could share some ideas and get the sufficient conditions internally and externally to win in vital few and cover the cost in the failure of trivial many.

    I believe we should buy the margin of safety but not the market sentiment unless the panic is full in the air. We should hold if we believe the margin are still there and hold when the trend momentum is huge since the star always shed the brightest light at its end or death. We should sell if we feel enough limited by ourselves and environment.

    After I bought FDL(later named as FMS) at $0.01 at 2007, had held it for more than 2 years, and sold at $0.135 when I felt fearful to lose the profit again. In hindsight, I should sell at $0.23 around but I failed. I bought IAU at $0.27 around, held it for more than 2 years, sold it when I lost the hopes for 10 baggers at $0.55 around, and see it up, up, and up to around $2.00 in a few weeks. I also bought LVL, VCR, and CKR, which just turned to be falling knifes. We play the risks to get more. No money is free. We should buy for affordable loss and sell for profit after the cost deduction.

    Everyone has different views and the market sentiment could burn our mind to red. Enough is enough but few could know it when the enoughness is moving in. Could we? Naturally we could but could we evolute ourselves to speed up this evolution much earlier than most of market players.

    Tried to sell as good as I could. I bought PRR at $0.016 in average, which I hold for about 2 years, and sold 97% of my holding at $0.235 but wrongly decided to hold the residual for more. We need to challenge ourselves not anyone else even we all hope we could win in the party together.

    Anyway market playing is art. Art is about execution, wide enough knowledge, and catching the basic about the risks and the flash of the opportunities with the measurement to stop anything ruining our portfolio. Risk intelligence could get result better and could help us to get win in the vital few and cover all of the cost of the trivial many.

    Just thought from my angles and thank you for all of your words. We could win and could compensate the gap of concept and perception each other. I would not challenge to anyone but find the gems from everyone's words for my market playing and contribute some gems if I have.

    Good luck!
     
    Last edited by a moderator: 16th Dec, 2010
  11. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Can we see wider and deeper into the future?

    We all know we need to see into the future wider and deeper but naturally we dislike or hate to do so. We usually want to find the data support ourselves about the future but it could not widen our views about the future. When we work hard to find self-support data, we run in the market with biases from a lot of blind angles.

    It is challenge to know what we don't know and it is challenge we fix our wrong belief and misunderstanding of the risks, its causes, and effects. Still in my learning curve to find a way to set up open mind, wise mind, adaptive and flexible mind, and then a mind to take the right risks from any chances which are found from my mind or others' minds.

    More thought in wdongli - Member Blogs and the corresponding comments as the expansion.
     
  12. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    It is human nature to see meaning in patterns. It is our survival instict. The more a pattern is linked with a positive we are attracted, the more a pattern is linked with a negitive we are repelled. Fear is an emotion to keep us away from danger. If we had no fear, we would die. Projecting, is where we see our own experiences through the lives of others.

    In the business world, the human experience still rules. You can not be anyone but yourself. If you could, then you wouldn't be you.



    Johny.
     
  13. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Hi Johny

    Thank you for your words which just triggers some more as following for open our mind not for right or wrong!

    All of us are fearful and greedy as you said. The question and challenge is how we use our emotion resources as our natural gifts.

    We could not be matured without experiences, which is very true but we could not limit ourselves in our own experiences. We could get more lessons from the human wisdom accumulated for thousands of years if not millions. How could we expect Buffett could hold so much resources in hands just using his own experiences.

    He has got the margin of safety and value from B. Graham. He has his long-term partner, Charley Monger, who acts as some wisdom reserves for Buffett, which especially was very important in several very critical crises in the ways. He has got the growth from Peter lynch.

    We need open mind and should stand on others' shoulder which is just higher than our own mental height. If we could do so we could let us go higher and higher everyday! We play the human game in the human world and it works for human. Albert Einstein said "the most incomprehensible thing about the world is that it is comprehensible."

    Pattern is like box. Not all of box would fit to all of environment and people. We need wisely adaptive and flexible to choose which pattern could govern ourselves in the market for profit!

    Let's work together to be the masters for our own life first and benefit others if we could be so!
     
  14. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    All the wisdom of the world is not equal to a day of insightful experience. However, a family can have more momentum in problem solving than an individual.



    Johny.
     
  15. wdongli

    wdongli Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    1,292
    Location:
    Perth
    Just try to invert even some great ideas!

    Family is always the first. A homeless soul to me is terrible even understand the young boys and girls who don't care about family since the modern societies have too much to distract them from the family.

    But a family could have destructive power too if you don't care about it! Market is market. Business is business. Family is family. Never and ever abuse your family for your personal dreams. Family needs contribution and love have the cost!

    It is my rule that is never and ever talking about the money too seriously with my loves but try to be ready to give all if necessary.

    LOL!