Excuse me, it is all my money and if I feel a stock has run to a sell point, I don't want to lose any of it. The whole connotation that the stock market is akin to gambling, also leaves a bad taste in my mouth. I don't even like to view stocks individually, it should always be about the entire portfolio.
That being said, I think the biggest mistake investors make is selling stocks that are going up too early and probably the second biggest mistake is buying stocks that are going down too soon.
Do Small Investors Have an Edge?
If you stop and think about us as small retail investors, what is our advantage, our edge? I think trying to count on speed or out-smarting the pros are very difficult to do. The pros are very smart. And they use high-speed trading and complicated trading algorithms, and thus are very fast.
I think we have two primary advantages:
- Being small
- Being able to take a longer term view
The longer view is something Greensblatt talks about in his book. For a large mutual fund or hedge fund, they really can not afford to under-perform the broader market for even a year, as investors will not have patience for that. So they are forced to move with the market. We can afford to buy a stock that is cheap and good and simply wait. They say the short-term market is a voting machine, but long term is a weighing machine. We can really take advantage of that. And with dividend stocks, where I am moving my portfolio, it is easier mentally to take advantage of that.