Thursday, November 11, 2010

Constant changing security is a major problem

Changing securities constantly without holding can drain the capital and the profits. Firstly it increases the transaction costs, secondly it increases the risk to new stocks that are volatile. One has to pick a stock that is constantly moving for example 10 percent per month and sit on it.

Now i got into DLTR. This stock has been doing good. It moved 10 percent each month the last couple of months above the 30 day average. One has to stick to this plan. Constant changing securities like the way I did with JKS, just wiped out the profit I got in BIDU and also now BIDU is moving up. So lost the extra money in BIDU and also the gain I made in BIDU last month. That is a horrible strategy.

It is very tempting to change stocks but it is a horrible habit. Its a waste of time and energy. The beauty of sitting and holding is that one has to just leave it and see your money grow. Do not be greedy, you will lose everything.

Foolishness and stupidity are ingrained in us. One has to take great care not to indulge in them, though indulging may give some thrill, our purpose in life will not be fulfilled.

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