Joe Blow said:
Do you trade full time or part time?
...Perhaps you are not a trader at all and take a long term view with your stock market investments.
Feel free to tell us about what sort of trader/investor you are are how trading/investing fits into your life.
I am a long term investor using only fundamental analysis. I review the companies in which I invest in periodically. Some are set and forget - unless they make an acquisition or change management, in which case I have to analyse.
Others require more active analysis (all resource sector shares that I hold and some industrial sector shares).
I developed an interest in investment in my Economics degree (accounting major). Later, I joined the banking industry as there was a perception then that it was secure employment and one would have a job for life. This changed of course.
When the retrenchments started, I realised that I needed to accelerate my investments to achieve financial freedom asap, as job security went out the window. The irony was that I survived all the waves of retrenchments but had reached my goal of financial freedom much earlier (age of 43) than I targeted (age of 50). I resigned from a job paying $120K p.a. Had enough of the 60 hours working week that I had to do for years. Work / life balance was way out of kilter.
The huge rises in shares in 2003 and 2004 gave me a quantum leap because I went from zero gearing at the end of 2002 to 60% gearing when my instincts told me that the ASX had bottomed at 2700. Bought lots of BHP under $9 in early 2003. Later bought Rio Tinto in April 2004 at $32. Also bought lots of WMR at under $5 in mid 2004, ZFX in 2004 (in that infamous ZFX thread - must be the longest thread on record due to all that repetition - one can get RSI just reading all that repetition
). Bought some Alumina and Iluka shares as well. A true believer in the mining boom. All doing okay so far, but I think the big test might come, if it has not already. Will try to be out before the cycle really turns but I think it has further to go. Time will tell. Meanwhile, WMR is "underwritten" by BHP for $7.85. Have reduced the gearing level since to a comfortable level, but mainly due to big price rises.
From experience, I think the requirements to be an investor are (no one has to agree with me):
1. Capital. Once you achieve compound growth off your initial capital base, the growth can get exponential.
2. Skills / knowledge. There are no shortcuts to fundamental analysis. A lot of studying (I did three post graduate studies part time, despite working long hours in my job) is required. On the job training with financial analysis and financial markets also helped. A lot of reading since the 1980's with BRW, Financial Review, The Age, and later Shares Magazine, The Economist, The Bulletin, etc. has to be done. Also watch Business Sunday and Alan Kohler's Inside Business program on Sundays. Have also read books on investments and books on Warren Buffett.
3. Courage and confidence. Have to eliminate all emotions (fear and greed) from the investment approach. Have to try to use clinical analysis in terms of buying a part of a business. Ignore daily market volatility unless they bring buying opportunities.
With some cyclical stocks, I do try to time the market by buying low and selling high but the time frame could be anywhere between 3 months and 8 years or longer, depending on my reading of the economic cycle.
Have not held any stock that has totally collapse so far (and hopefully never will), but I hold my portfolio with a view that any company can fall at any time and it would not bother me too much (tax deductions against CGT can cushion the blow if it happens). Difficult to see stocks like WOW, AGL, CCL, ORG, IVC, BHP and RIO ever collapsing.
If a bear market sets in, I merely reduce my gearing level and sit it out. If the bear market is long, I will probably reduce my gearing level to zero and wait until my instincts tell me the market has bottomed. Then I gear up again and buy big time.