TAOISM and the BULLCIRCLE INVESTMENT PHILOSOPHY
Many years ago I read The Tao Jones Averages, A Guide to Whole Brain Investing by Bennet Godspeed. The author writes of the basic philosophies used in stock market investing which have been prevalent for many years.
At the forefront is fundamental analysis predicated on the assumption that all stocks and ETFs have inherent determinable values that are often incorrectly appraised in the market place. By identifying these discrepancies, fundamentalists feel an investor can achieve a winning performance record. Most investors focus on security selection and fundamental analysis. They have been sold on the idea that making money is simply the process of buying solid, quality companies and holding them for long periods of time
The technical approach preaches the belief that the market does not work perfectly, that all known fundamental and factual information about a company is automatically reflected in the price of an ETF. In this view, the fundamental method is pointless, since the market is all knowing. The key to making money is to spot patterns that indicate supply and demand changes. Stocks go up if there is more demand so a solid understanding of mass psychology is far more important than good economics. Know that if a flipped coin shows 5 heads in a row, most investors feel a tail on the next toss is probable. That’s what you are up against. A stock’s price reflects and discounts everything that is known about the company, and as such, represents the view of all stock market participants. Most academics believe, and rightly so, that you cannot use information that is factored into the price of the stock to forecast its future direction. Technicians believe that while all relevant information has been assimilated, one can use other factors to assist in forecasting future direction.
Dealing with Risk
Stock market risk, or systematic risk, is the risk inherent in the entire market. How many times have we seen the shares of good quality companies decline in price due to a slump in the entire market? Stock market risk cannot be mitigated by diversification.
The long term is dead, no longer viable. Archaic techniques of buy and hold leave so much on the table in terms of potential money management. The buy and hold approach means suffering through repeated ravages of bear markets and corrections and the slow climb back to break even.
Studies have found that 75% of the movement of a stock’s price is based on the movement of the market as a whole. In other words, when the market tops and turns down, three out of four of your stocks, regardless of their quality, will go down too. The trend of the overall market will have a tremendous impact on the performance of your portfolio.
Don’t you then think it is important to have an idea on where the general market is headed?
Become A Smarter Investor
The characteristics of the world’s smartest people are those that correspond to the left side of the brain and can thus be measured by IQ, math, accounting, languages and science. Their liabilities centre around their lack of right brained perceptions which are non-sequential, intuitive, creative, and artistic. It is the right brain that can consistently sense the rapidly changing world of the stock market.
No matter how much research we do, the future is, by definition, unknowable. The stock market moves in trends which are determined by the changing attitudes of investors to a variety of economic, monetary, epidemic, climatic, political, and psychological forces.
Successful investing is a matter of technique, not simply prognostication. What has been missing from the endless and often mind-numbing dialogue about the market’s next move is a frank discussion about the craft of investing. The question most investors should focus on is what to buy, how to buy it, and how to sell it. Selling is the highest art form of investing. Finishing always triumphs over starting. When Pandora opened her box, out came fear, sin, pestilence, greed, and the last was hope, the false God, and an investors greatest enemy.
The BULLCIRCLE Newsletter
The BULLCIRCLE investment newsletter is emailed to subscribers every Sunday before 18:00 EST with short periodic WhatsApp or emailed messages sent out during market hours. It is not a newsletter in the literal sense. It is my investment account.
The newsletter is composed of two parts. One is THE TRADER which swing trades the S&P 500 using 6 different US listed ETFs, of which 4 are leveraged. Swing trading is a style that attempts to capture gains over a few days or a couple of weeks. This is done through a thorough, time-consuming, and detailed analysis of the S&P 500 using short term oscillators, stochastics, price and volume, TICKs, the TRIN, sentiment, and a whole host of other indicators. Subscribers receive WhatsApp or emailed messages when a trade is announced indicating what to buy, the buy price or the sell price, and stop levels. I will also be making the same trades in my own account and I will show my statement once a month in the Sunday newsletter.
The next part is MY PORTFOLIO, which spots patterns that indicate supply and demand changes in a large number of US listed ETFs. The stock markets move in trends which are determined by the changing attitudes of individual and institutional investors to a variety of economic, monetary, climatic, political, epidemic, and psychological forces. A solid understanding of mass psychology is far more important than good economics. The investment objective is active, intermediate term, above average growth. These signals will also be sent using WhatsApp or emailed messages during the week. I am not a long-term investor since the long term is dead, no longer viable. I see no sense in suffering through bear markets and corrections and the slow climb back to breakeven. Like the swing trades, I will also be buying and selling these ETFs.
Understand that if a flipped coin shows 5 heads in a row, most investors feel a tail is probable on the next flip. That’s what you’re up against.