Harry Browne the Speculator

[doug6zj9]

I am the worlds worst speculator (in financial markets) and not much better as an investor (in the last two years).  I never had a concept of support or resistance, or a method to determine buy and sell points, or way to quantify risk /reward ratios.

Believe it or not, in the "Why the Best Laid Plans..." book, HB gives a useful primer on these subjects in the chapters about the "Variable Portfolio".  This alone was worth the price of the book to me... and completely unexpected given his claim to fame as the anti-speculator. 

[craigr]

Doug,

There is a big difference between speculating and investing. If you are an investor you should be planning to hold onto your purchases for the long haul. No timing method is reliable enough to work.

A speculator has a gift of both timing and luck. First is getting it right on when to get into an investment before everyone else figures it out. Second is selling out once the feeding frenzy begins and not getting caught up in the greed to squeeze out every last penny of profit.

A good speculator has the nose to do what everyone else is not doing at that time before it becomes popular. These people are rare.

If I am buying an investment I want to understand it deeply so I know I made the best decision. This is not speculative behavior. In 2008 I forgot this and made a tiny bet on the banks when the mortgage fiasco started. As it turned out I was right that the banks did recover. But instead of selling my position I was stupid and held on waiting for more. By the time my stop losses kicked in I had lost some money! I had forgotten my own advice. I hadn't done any speculating before 2008 since the Dot Com boom. Now that I got burned in 2008 I won't try it again until 2018.  ;)

Overall the only strategy I've found that works consistently is to be very well diversified in a buy, hold and rebalance portfolio. Such a simple approach has consistently turned profits for me with little stress.