Friday, August 12, 2011

Over all financial analysis

1. I find that there are two days of safe investments for passive income. Passive income comes from other sources other than our regular job. One is rental money and the other is investments in dividend and growth stocks for a long term. These are the two no stress investments.

2. The more risky stocks which are not dividend stocks and volatile are more stress stocks. From my experience, no matter how good one is analysis, day trading is difficult. Because under stress, one does not take the right decision until one takes decision on technical indicators. Not guess work. Until then day trading is not worth wasting time or energy. One has to learn and experiment before taking big bets.

3. there is no loss or gain situation. So I am getting out now. Lots of entertainment for the year. As I had decided. I should just relax for sometime and just read some books.

4. One's aim should be to think of passive income coming from low risk investments like rental and stable dividend stocks. One should invest most of the money into that.

5. One should invest may be 20 percent money in high risk stocks. Either one is long or short does not matter. One can do whatever one wants to do but most of the money should be in stable investments.

6. It is not worth the stress. Learning how to manage life without stress is the intelligent way in life. Having a good quality life is more important and pursuing other intellectual or spiritual pursuits.

7. Day trading takes a lot of time and is time consuming. The other medium term investment like monthly investment is better even for the 20 percent invested in volatile stocks. Like following the 30 day moving average over 1 month time frame is the best way to invest money.

8. Following the lesson from the book Secrets of Profiting in Bull and Bear markets, one needs to have patience. When you purchase in a bull market one has to wait till the uptrend stock comes near to the 30 day moving average during correction then buy.

9. When you short wait till the down trend stock comes near to the 30 day moving average then short.

10. This is the only way to make maximum profit for less risk. THIS THE ONLY WAY. Day trading consumes too much time and quality of life comes down. One could be reading a book or other recreational activities instead watching the Stock market score board all the time. That is not worth it.

11. Again one needs patience. Just like one needs to have patience for the uptrend stock to move closer to the 30 moving average, one should also have patience to short a stock in downtrend to move closer to the 30 day moving average. If one does not have patience to follow this rule which is always true from all the graph and study, then one is not fit for stocks on a medium term strategy.

12. There is no use to say to oneself that one can do it next time when after all these months of stock watching one did not gain or lose. One reason is patience and following the rules.

13. If one is changing strategies everyday, then it is a problem too. One has to choose and only act when it is the right time.

14. Look at the market sectors graph in GOOGLE finance. When it is the bull market look at what sector has most most. Those are the stocks to short, when those stocks come near their 30 day moving average.

15. One can follow the IBD newspaper doing the bull market, their recommendations are good for bull markets but not for bear markets.

16. For bear markets ones has to do one's own analysis like looking at Google sectors and find which sectors are doing the worst.

17. Do not short when the market or stock has fallen down rapidly. It rallies or bounces back to the 30 day moving average. So that is too much risk taking. One has to wait till the stock comes loser to the 30 day moving average during a downfall and only then short it. This especially if you are putting all your money into it. Better bet all your money at the right time than gamble everyday.

Now coming to the point of passive investments where most of the money should be invested in. Look at rental and dividend stocks.

Rental money in India is a good option. Building some small apartments and giving to rent. No risk at all but at least some money is coming in. No stress.

Investment in 401K or 401 k like investment in Sharebuilder. Investing by automatic way is the best way to do it. Perhaps investing in 500 to 1000 dollars is good enough. One the long term there is no loss in this strategy. I have tested it several times

It is time to put money where it works. Enough of Experimentation now. Experiment is minimum money.

Day trading that I am experimenting should be with minimum money. Now it bull market not a market that is easy to make money. One has to short and one has to be patient till the stock moves to the 30 moving average. One has to decide if one can do that or not.

I should not be putting too much money in day trading when I am not good at it now. What ever it is I am exactly at no loss or gain situation. So that good.

I will follow this plan I like it. If I want to experiment I will do it with 5k especially in this crazy bull market. When it turns around many in a couple of years I will buy again later and hold good stocks from IBD list.

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