So the today issue is the art of trading. The investment is more art than science. Ben Graham, the mentor of Warren Buffett believed in the early 20th century if we would have more data we can make better decisions on the market. But we failed. Nowadays we have myriads of data about the market far more than 10 or 20 years ago, but the numbers of winner traders have not increased at all. We are still at 90% losing rate between the investors and seems this is a constant number and only 10% of the investors are profitable.
After the last decades of computerisation we haven’t found yet the perfect 100% efficient system. That is the biggest failure of technical traders. We are still only guessing and we don’t see what holds the future. So what has changed in terms of trading with superfast computers? Nothing. We have to act in the market like 40 or 50 years ago. The rules are still the same like the following:
- Buy cheap stocks.
- Cut the loss and let the win ride.
- Buy a basket of bargain stocks.
- Rebalance your portfolio once a year, selling what's expensive and buying what's cheap.
- Doing this over time works. You can beat the market.
- A great company is not always a great stock, and a great stock is not always a great company.
Why are we not doing these simple things instead of listening to our lagging indicators and try to find the magical forecaster indicator?
The BFM Assets Team.
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