Post by oldman on Oct 19, 2013 7:32:10 GMT 7
When you are a small investor, you may just have $10,000 to invest in stocks. If you spread your investments over 5 stocks, you can invest around $2,000 per stock. As your capital is small, you can theoretically invest in any stocks that you want without having to worry about the availability of stocks to purchase. This is because you will only be buying a tiny fraction of the total number of shares available for that stock.
As you become more successful as an investor, the amount you put in each stock will increase. There will come a time when it will be difficult to collect a meaningful amount especially if the stock is thinly traded. But yet you know that unless you can collect a meaningful number of shares, whether the stock goes up or down, it may not make much difference to your investment portfolio.
Investing is not about getting it right alone. It is about getting it right and making a significant impact to your net worth. The only way you can do this is to make every investment significant enough by buying enough of the shares to make this worth your while. After all, for a fundamental investor, the effort in monitoring a stock is really the same regardless of the amount of money that you put in it. As such, it makes a lot more sense to be a focused investor and put a significant amount of your net worth in each and every stock in your portfolio and then monitoring this small number of stocks with even more care and attention.
For the smaller stocks, if one intends to collect enough, it may take years in order to achieve this. One has to be very patient and collect slowly as the last thing one wants is for the stocks to run before you have collected enough.
There had been many times in the past when I had to release the stocks that I had been collecting because the shares ran up and I did not have enough shares to make it meaningful for me to continue monitoring the stocks. Yes, I could have kept those shares and let the price run up and be happy that I have a multi bagger on hand but the truth is that this is just going to be an ego trip as the amount of gain is really not significant enough to my entire portfolio.
As your portfolio increases in size, you too have to learn to up your game and learn to excel in the other dimension of stock trading - that of stock volume - and in the process become skilled in the art of demand and supply. After all, stock volume is intricately related to demand and supply. But the relationship of stock volume and demand & supply is not a straight line relationship. Sometimes, a large sell order will bring out more sellers and sometimes, a large buy order will result in no one else wanting to sell ....resulting in a dwindling in supply volume even though demand is there. Intertwined with volume and demand & supply is investor fear & greed.
As such, as your investment grows in size, it is not only fundamentals that is important but also your artistic ability to balance stock volumes, demand & supply together with your understanding of investor fear and greed. This is why as the size of your investments grow, investing is more an art than a science and only a few can get it right. Those who can get it right will excel in this game of investing while the rest will forever remain as small time investors.
The trick to investing successfully is not only to win, but to win significantly. And the trick to winning significantly is not only to master fundamental investing but also to master the relationship between stock volume, demand & supply and investor fear & greed... and the only way to master these, is to make mistakes and learn from the school of hard knocks.
As you become more successful as an investor, the amount you put in each stock will increase. There will come a time when it will be difficult to collect a meaningful amount especially if the stock is thinly traded. But yet you know that unless you can collect a meaningful number of shares, whether the stock goes up or down, it may not make much difference to your investment portfolio.
Investing is not about getting it right alone. It is about getting it right and making a significant impact to your net worth. The only way you can do this is to make every investment significant enough by buying enough of the shares to make this worth your while. After all, for a fundamental investor, the effort in monitoring a stock is really the same regardless of the amount of money that you put in it. As such, it makes a lot more sense to be a focused investor and put a significant amount of your net worth in each and every stock in your portfolio and then monitoring this small number of stocks with even more care and attention.
For the smaller stocks, if one intends to collect enough, it may take years in order to achieve this. One has to be very patient and collect slowly as the last thing one wants is for the stocks to run before you have collected enough.
There had been many times in the past when I had to release the stocks that I had been collecting because the shares ran up and I did not have enough shares to make it meaningful for me to continue monitoring the stocks. Yes, I could have kept those shares and let the price run up and be happy that I have a multi bagger on hand but the truth is that this is just going to be an ego trip as the amount of gain is really not significant enough to my entire portfolio.
As your portfolio increases in size, you too have to learn to up your game and learn to excel in the other dimension of stock trading - that of stock volume - and in the process become skilled in the art of demand and supply. After all, stock volume is intricately related to demand and supply. But the relationship of stock volume and demand & supply is not a straight line relationship. Sometimes, a large sell order will bring out more sellers and sometimes, a large buy order will result in no one else wanting to sell ....resulting in a dwindling in supply volume even though demand is there. Intertwined with volume and demand & supply is investor fear & greed.
As such, as your investment grows in size, it is not only fundamentals that is important but also your artistic ability to balance stock volumes, demand & supply together with your understanding of investor fear and greed. This is why as the size of your investments grow, investing is more an art than a science and only a few can get it right. Those who can get it right will excel in this game of investing while the rest will forever remain as small time investors.
The trick to investing successfully is not only to win, but to win significantly. And the trick to winning significantly is not only to master fundamental investing but also to master the relationship between stock volume, demand & supply and investor fear & greed... and the only way to master these, is to make mistakes and learn from the school of hard knocks.