Investment Strategies - Buying and Selling Approaches.

Buying and Selling Approaches.

Structuring a Portfolio for Long-term Growth – Siegel.

• Shares should constitute the overwhelming proportion of all long-term portfolios.
A reduced exposure to equities can be achieved through inflation-indexed
government bonds.
• Invest the largest percentage in a highly diversified range of low-cost funds, esp.
index funds.

• Place up to a quarter of your shares in mid- and small-sized stock funds.

• Allocate about one-quarter of your portfolio to international equities,
approximately equally between the USA, Europe, Far East, and emerging
markets.

• Use contrarian strategies of increasing stock exposure when most investors are
bearish and vice-versa.

• Invest when short-term interest rates are being eased.

• Follow calendar anomalies. Small caps do better in January. Superior returns
occur at the very end of the month and the beginning of the next month.
September is the worst month of the year. Mondays are worst, Fridays best.

• Use the 200-day Moving Average to time entry and exit from the market.

Value Buying and Selling. Source: The Motley Fool
Invest in good companies on the dip.

1. Do not down average.
2. Buy when market is pessimistic.
3. Sell when:
• Fundamentals change for the worse
• Grossly over-valued
• Better investment opportunity exists
• Stock falls 10% below purchase price or when 50 day Moving
Average falls below the Price line.
4. TMF Pyad Sell:
• PBV is usually the first to break. That is, it will go over 1. It
breaks first in most cases because the discount to 1 is usually
fairly modest to start with. Shares bought on a PBV of 0.9 need
only rise by 11% for the discount to be erased. But if the PE on
purchase was 8 and the Yield 5%, when PBV hits 1, the shares
would only be at a still attractive 8.9 and 4.5% respectively.
Do not sell just because PBV<1 ceases to exist.
• Sell on a strongly rising PE and falling Yield, unless there is an
indication that these would come back down to value levels by the
release of very good figures. Thus if historical PE had risen to 16
and Yield to 2.5% and an announcement showed doubled EPS and
Dividend, that immediately puts the shares back on to a PE of 8
and yield of 5% on a historical basis.
• If you wait for the announcement, review the net Cash, PBV and,
especially, EPS forecasts. If these still make sense stay in because
the share had reinstated deep value status. This situation is quite
rare.
• In most cases, announcements merely confirm that the share has
performed in line with expectations, rather than greatly exceeded
them, and has lost super value status. Therefore, after a good rise,
where most of the deep value has gone, sell shortly before
announcements, rather than after, because shares frequently fall
back following the figures, unless those figures are much better
than anticipated. That does not happen often.

Technical Analysis Indicators.

• Establish the existence of a trend when the 20, 50 and 200-day Moving Averages
go up together.
• If the Price Line penetrates the Trend Line upwards this gives a Buy signal and
vice versa.
• If Volume is up on an upward breakout, this authenticates the Buy Signal.
• Moving Average. Buy when the share price rises above its Moving Average and
vice versa.
• 10 and 20-day Exponential Moving Averages. Buy when the shorter average goes
above the longer Moving Average.
• Relative Strength Indicator 21. Buy when above 50 and Sell below 50.

Moving Average Charts:
Buy Signals
• If the average line flattens out or advances following a decline, and the price of
the stock penetrates that average line on the upside, this constitutes a major
buying signal.
• If the 50-day Moving Average, moving up, goes above the 200-day Moving
Average this is a Buy signal.
• If the price of the stock falls below the Moving Average line while the Moving
Average line is still rising, this also is a Buy signal.
• If the stock price is above the Moving Average line and declines toward it, but
fails to go through and instead turns up again, this is a Buy signal.
• If the stock price falls too fast and far below a declining Moving Average line, a
short-term rebound toward the line may be expected.
Sell Signals
• If the Moving Average line flattens out or declines following a rise, and the stock
price penetrates that line on the downside, this constitutes a major Sell signal.
• If the 50-day Moving Average moves down through the 200-day Moving Average
this is a Sell signal
• If the price of the stock rises above the Moving Average line while the M A line
is still falling, this also is a Sell signal.
• If the stock price is below the Moving Average line and rises toward it, but fails
to go through and instead turns down again, this is a Sell signal.
• If the stock price rises too fast above a rising Moving Average line, a short-term
reaction may be expected.