Gyroscopic Investing

Our thinking and our expectations for this strategy (and all Dow-based strategies) have changed. Please note that the returns quoted below are based on calendar-year portfolios for the period 1974-1999. Additional research has shown that investors cannot expect such high returns from these strategies in the future.

moda0306 wrote: Man you've been around the investing block.  

moda0306 wrote: My cousin did some Motley Fool thing and even after 2008 said she did pretty well.

Alanw wrote: I was all over the board after firing my Financial Advisor in early 2009.  My worst investment experiences after that were:

1.  Sometime around the first quarter of 2010 President Obama was becoming more lenient on drilling in the Gulf of Mexico.  In March of 2010 I purchased shares of RIG (transocean).  What could go wrong there.  Less than 30 days later the BP well blew up.  For some strange reason, I held on and the shares returned me a very small profit (about 1 year later).  I ejected when the share price passed my original purchase price.

2.  In the early part of 2011, I decided that alternative energy ETF's might be a good play for some investment dollars.  We all know that ETF's wiil keep you diversified in one sector.  Nuclear power was being touted  as one alternative energy source of the future so I took a position in URA (Uranium ETF) literally two weeks before the earthquake and tsunami in Japan.  I am still holding a small position and have recovered to a loss of just over 50%.

Well that was the last straw and I went 80% into the HBPP. 

Thank you HB, Craig, MT and all the other posters on this forum.  Some sanity has finally returned to my investment life and I am sleeping much better.

MediumTex wrote: The most vivid memories I have of bad investment experiences are not the bad calls so much as that alternating feeling of excitement (which is basically greed) and desperation (which is basically fear).

Any person toggling between two intense emotional states is unlikely to be making good decisions along the way.

One of the things that the PP teaches you is how good investing ought to feel.  It's neither greed nor fear, but just a proper alignment of personal risk tolerance with your actual investments.  I think that many investors rarely feel this state of calm when it comes to investing.  Even when their calls turn out perfectly, there is often that hectic feeling of "Okay, I've made some money.  What should I do now?  Should I sell a little and let the rest ride?  Should I maybe buy a little more?"

It's nice to be away from all of that mental static.  It's exactly the way it feels wandering around a casino at 4:00 in the morning.  It's not productive and its probably not healthy (though some people do find it exciting).

rickb wrote: My wife and I worked for the same company (a blue chip Fortune 500 company) and had 10-year stock options with a 3-year vesting period that 3 years in were worth, on paper, about $430,000 (after tax this would have been about $250,000).   We thought "what kind of idiot cashes 10-year stock options only 3 years in".  Answer: many of the VPs (according to Yahoo Finance insider trading reports, one cashed $25M worth of options and another $10M worth of options literally days before ...).  The stock dropped 25% in a day (bad earnings report).  At that point our options were worth "only" $290,000.  Well, we thought, it will certainly go back up (in the next 7 years).  It dropped again to about half the previous high (options value now $145,000).  Well, it will certainly go up from here.  To make a long and very sad story somewhat shorter we managed to eke out about a $10,000 profit from these options before they went completely under water (and expired, worthless).

Moral:  if any single asset - particularly an asset in any way, shape, or form related to your employer - exceeds 10% of your net worth, sell it down to at most 10%.  The fact that many of the VPs were selling was not made public until much later (and, surprisingly, none of them are in jail), but if you can get timely information about what execs in your company doing with their options, pay attention.  On second thought, never mind.  There's no way you'll get timely information about what execs in your company are doing, and if you ask them at an all hands meeting they'll flat out lie to you.

Ad Orientem wrote: I bought Ken Heebner's CGMFX in June of '08.  Another example of chasing returns that went bad.  I still cringe when I think of how badly I got scalped.