Stock Trading System

  • Subscribe to our RSS feed.
  • Twitter
  • StumbleUpon
  • Reddit
  • Facebook
  • Digg

Sunday, 27 March 2011

Every "Stock Trading Riches" Position is Ultimately Self-Correcting

Posted on 00:33 by Unknown
I'm always amazed and excited when I think about how much my Stock Trading Riches system adjusts and self-corrects itself to actual market conditions.

Not only does each stock's average purchase price get adjusted through rebalancing, but even the stock itself is correctable. If you find fundamental reasons to no longer own a stock, its position can be easily switched over to another stock through rebalancing.

This is because the rebalancing formula is pure mathematics - it doesn't care if you plug in stock X or Y.

For example, suppose you were maintaining a constant value of $5,000 in Walmart and, after a particular year, your position was down to $3,000. Normally, you would buy $2,000 of Walmart.

However, if you lost faith in Walmart (for example, heard it might go bankrupt), you could choose another stock - say Target (it doesn't have to be in the same industry), sell all $3000 of Walmart, and buy $5,000 of Target.

You would then have a capital loss, and could say that Walmart was a failed investment. But, that is only if you viewed the position as a "Walmart position".

If, on the other hand, you took the view that it was a "$5,000 slot", and Walmart happened to occupy it for a while, and now Target occupies it, then ultimately it is not a failed investment.

In fact, if any given position can always systematically buy low and sell high serially across different stocks, then you can't really have a losing position in the long run.

At the high level, the "Stock Trading Riches" system is about splitting your portfolio up into constant dollar slots in which stocks are rebalanced to capture dividends and capital fluctuations. The slot can outlive any particular stock.
Email ThisBlogThis!Share to XShare to Facebook
Posted in Personal Finance, Stock Trading | No comments
Newer Post Older Post Home

0 comments:

Post a Comment

Subscribe to: Post Comments (Atom)

Popular Posts

  • Lichello's AIM System
     I previously mentioned how my trading system is build around constant value investing.  Another system that is based on this technique is ...
  • Naked I Trade, Naked I Live
    No - I don't literally trade naked or live out my day running around the house naked! I had a zen shift after getting zen slapped - I ca...
  • Flooding opens up sinkholes in Guatemala City - Yahoo! News Photos
    Here's an even more dramatic picture of the sinkhole: http://www.businessinsider.com/giant-sinkhole-guatemala-city-large-2010-5 Hurr...
  • The Stock Trading Riches Message Board on iHub
    I've created a new message board on iHub to discuss and answer questions about my book, the Stock Trading Riches system, trading and in...
  • Sand Sculpture of Barack Obama in Puri, India
    Cool sculpture ...
  • John Thain is getting Subpeonaed in NY about the billions in bonuses Merril Lynch paid out before Bank of america got its latest bailout...
    http://www.charlotteobserver.com/597/story/499083.html
  • Cliff Diving in Wing Suites in Norway
    This is extreme, crazy diving !
  • San Francisco Bridge and Outsourcing: Is 6% Worth it?
    California is replacing the San Francisco - Oakland Bay Bridge. It sounds like the type of large public works project that will provide nee...
  • Making Passive Income With Minimal Niche Sites
    My passion is finding simple lazy ways to accomplish my goals. For example, one of my dreams is to visualize myself collecting passive incom...
  • "See, Santa Also Likes Coke!"
    On Sunday, I was at the store with my 3 and a half year old son, and he wanted Coke. He recognizes the brand instantly. He also recognizes ...

Categories

  • Billionaires
  • Business
  • celebrities
  • crisis
  • Entrepreneurs
  • FHA
  • Financial Crisis
  • Government
  • Hollywood Bollywood
  • Humor
  • internet marketing
  • Law
  • Marketing
  • Passive Income
  • Personal Finance
  • Personal Growth
  • Politics
  • Real Estate
  • renting
  • Stock Trading
  • Taxes
  • Videos

Blog Archive

  • ►  2013 (13)
    • ►  December (1)
    • ►  November (1)
    • ►  August (1)
    • ►  July (1)
    • ►  June (1)
    • ►  May (1)
    • ►  April (4)
    • ►  March (2)
    • ►  February (1)
  • ►  2012 (33)
    • ►  October (1)
    • ►  September (2)
    • ►  August (2)
    • ►  May (1)
    • ►  April (6)
    • ►  March (9)
    • ►  February (9)
    • ►  January (3)
  • ▼  2011 (76)
    • ►  December (6)
    • ►  November (9)
    • ►  October (3)
    • ►  September (4)
    • ►  August (6)
    • ►  July (7)
    • ►  June (6)
    • ►  May (9)
    • ►  April (12)
    • ▼  March (5)
      • Using A Stop Loss With The Stock Trading Riches Sy...
      • Every "Stock Trading Riches" Position is Ultimatel...
      • Effect of Japanese Earthquake on U.S. stocks
      • Family Finance Carnival
      • Tax Carnival #82
    • ►  February (2)
    • ►  January (7)
  • ►  2010 (132)
    • ►  December (15)
    • ►  November (7)
    • ►  October (8)
    • ►  September (14)
    • ►  August (6)
    • ►  July (13)
    • ►  June (19)
    • ►  May (12)
    • ►  April (8)
    • ►  March (12)
    • ►  February (6)
    • ►  January (12)
  • ►  2009 (197)
    • ►  December (11)
    • ►  November (7)
    • ►  October (8)
    • ►  September (4)
    • ►  August (12)
    • ►  July (25)
    • ►  June (28)
    • ►  May (24)
    • ►  April (22)
    • ►  March (21)
    • ►  February (14)
    • ►  January (21)
  • ►  2008 (49)
    • ►  December (18)
    • ►  November (4)
    • ►  October (16)
    • ►  September (11)
Powered by Blogger.

About Me

Unknown
View my complete profile