Is it not about the sale but the repurchase

antiFlash-icons-graphs-800pxI’ve got a specific investment management strategy that I like, but it has a gap: what happens in continued “updraft” times like we’ve been having for the past 6 months (and more). I had formulated last year an approach of using “market sector” EFTs and applying the same individual stock picking principles and then having an exit strategy for downturns. I also have always liked income-producing stocks, but they have also gotten extremely highly valued.

So I experimented last year with purchases with a stop-loss price (I probably don’t have the term right). However the problem is, what’s the appropriate downturn? If you pick 1% you trigger a lot. If you wait until a day has passed, you could miss a huge plunge. If you wait for a larger drop…no matter what drop it is, it could merely be a dip. How do you not lock in losses?

What I’m going to try and explore now is not merely the sale from a stop-loss, but how to have a pre-defined plan for a re-purchase if the price goes back up from the low point. That does mean I will lose the gap between the stop loss and the re-purchase, but I don’t put myself in the endless analysis of trying to figure out when to get back in.

They say don’t try and time the market, and my biggest failing in the last decade is that I get nervous and implicitly try and time the market.

Note that I’m going to use this blog for different things at this point. I will work on renaming it.

One thought on “Is it not about the sale but the repurchase

  1. Feedback on this post made me realize I didn’t capture one thing: there would be a “floor” of selling that would be “static” — I wouldn’t reset the floor when I did the repurchase. So if it stayed below the price of repurchase (e.g. 1% above the selling price) it wouldn’t be bought, then it if rose and fell it would be sold again.

    Writing that out made me realize the problem would be crossing that boundary multiple times, so I’ll need to model that some. My goal is to not “abandon” an investment for a small “correction” that is immediately erased. So I probably need a time limit on how long the re-buy is in place (e.g. 5 days).

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