My new book, Rule 1 of Investing: How to Always be on the Right Side of the Market, was just released on Amazon. I talk about my Market-Directional approach and the rules necessary for successful investing, writes Mike Turner, who's presenting at MoneyShow Dallas.
One of my rules, “Don’t Fall in Love with a Stock, it Won’t Love You Back,” was front and center this week in one of the portfolios I manage professionally.
Tandem Diabetes Care, Inc (TNDM) showed up on my screen during the summer. It was trading in the $2 range last year and earlier this year before moving higher this spring.
Then, after my “Composite Index,” which is a combination of the S&P 500 (SPX), the S&P 400 (SP400), the NASDAQ (IXIC) the Russell 2000 (RUT) and the Dow (DJI), gave a bullish buy on the market, I bought TNDM for my clients in the middle of July at $26.91.
The stock shot up to $50 just a week ago and I moved my stop higher over the weekend. On Monday, the stock gapped lower and hit my stop. My clients ended up with a gain in TNDM of 49% in just about two months. Yes, ultimately, this was a good trade.
My Market-Directional system will never get us out at the top of the market. No system can do that. The goal of the Market-Directional methodology is to identify stocks that have established strong uptrends and capture 50%, 75%, even 90% of the move higher. However, at some point in time, the uptrend will be broken and I want to get out at that time.
“But Mike, what if it keeps moving higher? Aren’t you leaving money on the table?”
I hear this all the time from the buy-and-hope crowd. They don’t understand that the goal for the vast majority of people is to make money in the stock market. Period. Remember… it’s not what you own that matters as much as what you make when you sell.
This next statement is important:
I buy stocks for one reason and one reason, alone… I buy stocks in order to sell them.
Read that again.
I buy stocks in order to sell them.
I don’t say that I buy stocks in order to collect a portfolio of fundamentally impressive stocks. I buy stocks for the sole reason to sell at a higher price than I bought them at. My computers tell me which stocks give me the best opportunity to make money based on when to buy and, more importantly, when to sell. When my computers tell me that it’s time to exit those stocks, I do so. Without looking back.
My computers told me it was time to sell TNDM. Yes, it might move higher and at some point in time, TNDM might show up on my computer screens again. I don’t care what the company itself is doing, all I care about is how well the stock is doing. When it’s time to exit a position, there are no second thoughts.
Don’t fall in love with a stock. It won’t love you back. And the divorce is ugly. You can’t win unless you’re willing to hold onto a stock forever; never sell; never need the money; never worry over a 30%, 40%, 50% or more loss; and, most importantly, you are going to live forever. Buy-and-hold is for stock “collectors.”
Are you a stock collector or are you a money collector? You can’t be both.
Again, you can find out more about all of the rules in my new book by clicking here. It’s available in both paperback and Kindle.
The MoneyShow Dallas is coming up in just a few weeks. It takes place the first week of October and I hope to see you there.
The MoneyShow Dallas – October 3-5
Oh… just one more thing. I am hosting a 90-minute special meeting on Saturday morning, October 6 at 9:30 am, at the Hyatt Regency Dallas, the day following the MoneyShow. This is an in-depth presentation of my Market-Directional approach to money management. If you would like to attend, send me an email with your contact information and we’ll send you the specifics on the meeting.
Stop guessing and start measuring,
If you’re interested in learning more about how I manage money using the Market-Directional Investing methodology, you can read more here.
Mike Turner: how to measure a market, in a short video.
Recorded: MoneyShow San Francisco, August 24, 2018.
Duration: 4:22.
