6.11.2013

Investing in "a twitchy market"


100-Point Dow Swings Are Back

Excerpt:

For the seventh time in the past ten sessions, the Dow Jones Industrial Average (^DJI) is moving at least 100 points, up or down, from the previous close. The cause of the volatility is hard to pin down since it is almost equally split between rallies and sell-offs, as well as domestic and foreign worries or hopes.

Today's early jitters appear to be pegged to the fact that the uber-easy Bank of Japan held pat and did not see the need to be even looser with their devaluation efforts. Fortunately, better-than-expected Small Business Confidence has tempered the disappointment, forcing investors once again to make a buy or sell decision on a twitchy market.
Comment: Image Source. Advice:

  • Watch the market daily if one wishes. But do not be overly euphoric on market upswings or overly morose on downswings. This leads to the next point:
  • Don't invest emotionally! 
  • Schedule investments. Examples: $ 300 on the 2nd Tuesday of the month. Our schedule is weekly.
  • Spread buys. For example today we bought 5 shares of Stanley Black & Decker, Inc. Our objective is to acquire 100 shares. This will take multiple weeks. By the time we have acquired 100, we will probably have 10 -15 buys over several months. 
  • Buy on fundamentals. Example. We have a high degree of confidence that SWK will pay a 2.5% dividend.
  • Follow the value investing principles of Benjamin Graham - The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
  • Hold for a period. I expect that we will have SWK for more than 3 years.
  • Remember that Sometimes Mr. Market behaves like 'a psychotic drunk'"



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