There was no doubt in my mind: Algorithmic trading was a gold pass to make a lot of money. My transition to fully-fledged system trader would take time. I had a lot to learn about markets before I could start designing my own trading systems. But I can say this: I’m the trader I am today due to algorithms — they’re by far the greatest find of my career.
Today, we’re going to look at something a little different. We’re going to look at when you should sell your small-caps stocks. It’s not always an easy decision to make. But it’s an important part of investing. If done wrong, it could significantly reduce your returns. But if done right, you could lock in profits and minimise your risk at the same time.
For small-cap stocks, cash flow is extremely important. I would argue it’s even more important for small-cap than it is for Blue Chips like IBM. And that’s because they have far fewer options. Unlike IBM, small-caps don’t have as much power to renegotiate lending terms.
What does a typical stock portfolio look like? Well, it’s apparently not too flash. According to Openfolio — a network of 70,000 members who share their portfolio data — the average US investor made less than half the S&P 500’s return in 2016.
We’ve been preparing for life in a bear market for some time. By this I mean giving ourselves every chance of making some money while also recognising the downside risks of a market potentially transitioning from bull to bear. How is this transition looking now?
Small-caps are an amazing opportunity. They have far more volatility, but that’s the point. Not all small-caps are worthy investments. Some could be amazing. Others you’d be completely crazy to buy. Today we’re going to look at how to approach small-cap investing. Specifically, we’re going to look at how to limit our losses.
As previously stated, China is Australia’s largest trade partner. And the US is Australia’s third largest (with Japan coming in second). The US is Australia’s biggest foreign investor. China comes in seventh spot. So Australia could potentially have trade wins from both nations, if tensions increase between the two.
How often do you take stock? It could be with your career, share portfolio or life in general. New Year’s Day is a popular choice for reflection. Many people use this as a time to look back at the year that was. It’s a chance to consider what went well, or not so well.
As our market dips lower, the so called ‘experts’ are screaming ‘buy the dip’. But the best thing to do might be just to sit and think. Out of curiosity, what are the ‘experts’ predicting now? Some are incredibly bullish and others are incredibly bearish. Nothing has really changed.
I’m not just describing the technical or momentum trader here. Value investors also fall into this camp. Instead of buying stock they believe to be cheap. They buy stocks they believe the market will believe are cheap. For most, this kind of strategy turns out exactly how you’d think. It wastes a whole lot of time and money.