New Year’s Resolutions for Traders

An investor’s New Year’s resolutions, by John Magee (via Jeff Saut)

Resolved, that in the coming year:

• I will not alienate my friends and antagonize my family by reminding the world on every possible occasion how right I was about the upturn – or downturn – in steels, motors, airlines, or whatever.

• When I buy a stock I will not mobilize all the good news to make it look pretty. I will try to consider both the favorable and unfavorable angles as impartially as I know how.

• I will not close out a stock position that is doing well by me for no other reason than that I have a profit. I will not cut short my gains in a good situation.

• I will not hang on to a stock that is persistently going against me. I will limit my loss, and close out any position that seems to have gone really bad before I am in danger of serious trouble.

• I will not be swayed or panicked by news flashes, rumors, tips, or well-meant advice.

• I will not put all my eggs in one basket, nor will I be swept off my feet to plunge into some unknown or low-priced stock on a purely emotional basis.

• I will not attempt to tell the market what a stock ought to be worth. I will try to understand what the market has to tell me about what people are willing to pay for it.

• I will never forget that I am not in the market primarily to prove – to my broker, my friends, my wife, etc. – that I am smarter than everybody else, but to protect and if possible to augment my capital.

Terrific list. Thanks, Jeff!


Jeffrey Saut, Investment Strategy
Raymond James, January 4, 2007

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  1. blam commented on Jan 7

    Great advice. Having broken every one of the above “resolutions” at one time or another I have printed them out and posted prominently.

    Taking the loss is the hardest one. Most of the other ones can be classified as a subset. If you ever find yourself praying for a reversal, get out.

  2. Frank Rizzo commented on Jan 7

    I will not alienate my friends and antagonize my family by reminding the world on every possible occasion how right I was about the upturn

    Damn, that’s harsh. If we all followed that rule back in ’99, how else would we have showed off about how smart we were to buy at a thousand bucks a share?!

  3. Michael C. commented on Jan 7

    Nice list. Thanks, BR!

    Also, just went to a grand opening of a new development in SoCal. About 3.3k to 4.5k sq ft and 980k to 1.6m+. Very large ocean views on some of the homes. Parking was crowded, and in the models, there was someone in almost every room of each house.

    Over the past year, inventory has soared. And there have been homes with price reductions. But median prices on average haven’t come down all that much.

    And there are still so many pickup trucks around here that advertise plumbing, swimming pools, custom cabinets, etc dot com. Yet I neither feel nor see much hurt from the housing slowdown though it has been over a year since the peak.

    I’ve been renting since late ’05. Almost the exact peak, and got a nice price and profit on our sale. But damn if the wife ain’t getting impatient about having rented for well over a year. A slow leak is rather pathetic when the bubble has grown this much!

  4. Lauriston commented on Jan 7

    “I will not be swayed or panicked by news flashes, rumors, tips, or well-meant advice.”

    it would help a great deal if the various Fed Presidents (including da Chairman himself), would cease and desist from making “market-moving” comments during the trading hours :) LOL. They stopped CEOs from doing it, maybe SEC should go after Fed presidents. Just my wishful thinking…

  5. V L commented on Jan 8

    Can anybody explain to me as to why when the Euro is at a near record high, Germany has a manufacturing resurgence and it is exporting successfully to China, but America with its slumping USD continues complaining of the Yuan as an obstacle to exporting to China???
    Maybe the problem is not the Yuan?

  6. Macro Man commented on Jan 8

    V L

    One reason is that corporate Germany has had a restructuring renaissance over the past few years, which has delivered significant productivity gains. A second is that the German economy is naturally geared to exports; indeed, Germany was the world’s largest exporter last year. A third reason is that German companies tend to be relatively sophisticated at hedging their currency exposure, such that their effective hedge rate is not necessarily the same rate that you see on a screen.

    Contrast this with France, which appears to have hit a brick wall, prompting more gnashing of teeth and moaning about exchange rates than you ever see from the US Treasury.

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