When it comes to investing, I've spent a great deal of my time in the past 10 years thinking about one big problem.
I have a pretty decent grasp of fundamental analysis and I, at least, understand a bit about what the tea leaf readers a.k.a. technical analysts are saying about this or that chart. So I usually know WHAT to invest in.
Problem is, all too often, I get the HOW MUCH to invest part woefully wrong.
When I was younger, I would EITHER go too big on a bad idea or too little on a great one. I had trouble for coming up with a system for finding an investment scheme that got my allocations JUST RIGHT.
That Goldilocks number is just too hard to track down for most retail investors. I've spent half my life messing around with spreadsheets to try and divine some magical formula for maximizing gains and minimizing risks. But a lot of it just comes down to feel and being disciplined about maintaining your ideal portfolio weights, NO MATTER WHAT might happen to the value of your portfolio in the interim.
Most people just sell fear and buy cheer.
In fact, the best strategy in the long run, and the trades that I have made the most money on in my investing experience, is when I act in a contrarian manner. In other words, retail investors would do better to
But it's too hard. We don't do it. Our emotions get in the way, which makes sense. What would be your natural reaction to the following situation?
So I've found that it's better if I develop little rules of thumbs for myself, guidelines for me to follow no matter what the market in general is doing.
One of my favorites is the basic
where you put 1/3 of your investable portfolio into each of the following:
It doesn't always mean that my portfolio is allocated as such, but it gives me a rough guide as to where to put my money when I have fresh funds.
And most importantly, it means that the bears just can't eat me.
Which is what inevitably happens if you spend too much time looking for that Goldilocks number if you haven't thought too much about it BEFORE things get too emotional.
