Stock Portfolio: Stay on the Fast Horse

A major component of managing personal finances is growing your savings through investing. There are as many ways to approach investing as there are opinions. That is why care must be taken when risking your hard-earned dollar in any investment.

The area of focus for this study will be investing  mutual funds. However, do not – I repeat – do not take this as professional investing advice. Do your own research and decide what is best for you and your situation. If this exercise aligns with your goals, then you have another data point for your research.

Keep Your Stock Portfolio on the Fast Track

My style is not like Warren Buffett. That gentleman has had ENORMOUS success over the years and I tip my hat to him and his organization. His style is to research, research, research, then buy a stock for the long term.

That is a sound strategy. Just not for me.

Don’t misunderstand. I am not suggesting day trading. Nope. I don’t have the time nor the stomach for that sort of “fun.” Those who do often win (and lose) a lot of money. I just have a different style.

Mutual Funds for a More Stable Ride

As I said, this is not day trading. Too risky for me and it simply takes too much time. My focus is on trading mutual funds – no load mutual funds – as a way to spread the risk. Each fund has professional money managers who do the Buffett-style research and decide the basket of stocks that fund should own.

To further expand this “diversification” I then own multiple funds at one time. Combine these two dynamics and you can see there are many, many stocks in which I am investing, not just a few. Much less time invested and much less risk.

Ride Mutual Funds Like a Jockey

We’ve all seen a horse race. They all start out together and throughout the race, there are clear leaders and those who aren’t running quite as fast.

And it changes!

Think about those races where the lead changes frequently. What that means is that at any point in time, one particular horse is running faster than the rest. Then another… then another… you get the idea.

The metaphor on which to focus is to “stay on the faster horse.” When that horse slows, jump off that one and onto the one about to pass you – the faster running steed.

Sounds Simple, But How?

Mr. Buffett has his research methods and so do I. My goal is to look for the best recent performers that I expect to maintain that running speed for the near future. When my indicators show a “slowing” I look for opportunities to jump to an up-and-comer.

What I like about identifying a fast (or slowing) horse is how it takes the emotion out of it. I don’t have to worry about how long I’ve held that fund, or who told me about it, or which friend works for one of the companies represented, or any number of other emotional connections.

I just buy on the “speed-up” and sell on the “slow-down.” That’s the goal!

Portfolio Management

As I mentioned earlier, I’m not a day trader – nor am I a Warren Buffett “buy and hold” sort of guy. I guess I would call myself a semi-active trader. That means I look for opportunities to buy or sell once a month when I do my research.

This doesn’t require me to follow the market minute by minute, or even day by day, but it still allows me to be actively engaged. For me, it’s the best balance, committing to just a short amount research time monthly. I suggest checking back at least monthly.

Aaaaaaaaand They’re Off!