Passive and Active Investment

Posted on 14 November 2011 by Douglas Chadwick

The finance industry puts labels on the various methods and thought processes used in making buying and selling decisions. The Saltydog approach has been put down as "momentum" investing. They say it is old hat and not worthy of the twenty first century. Apparently the world has moved on since the times of the nineteenth century multi- millionaire Jessie Livermore. But has it,or has it moved back to his times.
 
The "stocks for the long run" worked in the period 1980 to 1999. During this period although the stock markets had their rises and falls, these movements took place on an upwardly moving trend. So " place and forget" worked over the long term. This is no longer the case. Over the last ten years the trend is sideways or down. So this approach is doomed to failure. Being passive will lead to abuse.
 
If you look at the graphs of the last ten years you will see that the peaks and troughs do not occur overnight. They take many months even up to a year to complete their cycles. There is plenty of time to exit on the downward slope and re-enter after it turns back up. To get the timing right or even half right, all you need is a regular flow of up to date accurate information and the desire to be active with your investing. You must understand that it is not a sin to protect a gain and to avoid making a loss. Be brave become a "Saltydog."