This subject is quite complicated so if you have not read the first Part then it is probably best to look at that first - you can find it here:
http://wheeliedealer.weebly.com/educational-blogs/the-mechanics-of-a-trade-part-1-of-3 Example 2 - You want to buy 3 Shares in Company XYZ but this time you use a ‘Limit Order’ The basic Assumptions are as I listed at the start of Example 1. This time you still want your 3 Shares in XYZ but because it got kicked back at you in Example 1, you have decided to use a Limit Order through your Broker, where you indicate a maximum Price you are prepared to pay for the Shares. For this one, here are the steps as your Order flows through the various Processes:
0 Comments
It’s funny the things in life than can really get under our skin and something that really grates with me is when I see people on Twitter sending out a Tweet to the effect of “A big Buy for 200,000 Shares just went through on XYZ……” (heck, even just typing this is getting my Blood Pressure up !!).
Apart from the fact that the vast majority of people who Tweet sh*te like this are probably Rampers (or perhaps they are just not very clued up on what is really going on), the big issue with this is that if there is a Buy for any Shares then it is a simple truth that there is always one or more Sells on the other side. So if you are taking notice of a Buy Trade and thinking that this is a good thing, then you must be making the cognitive leap that whoever was on the Buy side knows more than whoever is on the Sell side. Without knowing who the individuals are, that is obviously impossible to know and even if you did know who was Buying, you are making an assumption that they are correct (no one is 100% right - even Warren Buffett gets things wrong).
Following on from a different Blog I put out recently that was inspired by some text written by Chris Dillow in Investors Chronicle, again I have been reading one of his Articles and taking inspiration from it. This one appeared in the Magazine from 13th July to 19th July 2018 which had ‘Income Majors’ on the front cover and the Article was entitled ‘In the genes’ and appeared on Page 16. If you are a subscriber to the Magazine then I suggest you go onto the online version and do a search for the article because it is well worth reading. Having said that I have reproduced a few sections of the text here so this will give a good flavour of what is in it.
The starting paragraph is based on some Research that had been done which suggested that Investment Performance was related to our genetic make-up (presumably intelligence levels and Chris mentions the genetic factors that increase our potential Educational Attainment) and that factors such as ACTUAL Educational Attainment, Income Levels and inheritance had less influence. So this suggested that our genes predict how well we save and invest and further on in the article he mentions that such Genetic Factors explain about a third of our Investment Results; and I take from this that at least a part of the other two-thirds is down to how we manage our Portfolios in terms of things like Running Winners, Chopping Losers, Averaging Down at the right time, Avoiding AIM Garbage, TopChopping, Risk Management, Hedging, etc. And of course another chunk of that two-thirds will be down to pure dumb Luck (but if we control as much as possible of the other stuff then the Luck is less of a hindrance and of course sometimes we will get Good Luck which is the sort I like !!).
Earlier this afternoon I was reading a copy of Investors Chronicle from a few Weeks ago (as always I am way out of date on my reading !!) and there was a couple of pages on a Regular Feature that Chris Dillow writes regarding several different Investment Strategies and how they work over time (Editor’s note - this Blog was first written in draft form back in mid 2018).
I reckon I might have done a Blog around this before or at least I have probably referred to what Chris does in this Strategy Piece and I guess that is one of the catches of having written various Blogs for nearly 4 Years now - I totally forget what I have written about and what I haven’t !!
This is the last part of this Blog Series and you can read the earlier bits at these Links:
http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-1-of-3 http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-2-of-4 http://wheeliedealer.weebly.com/educational-blogs/the-spectrum-of-how-to-organise-a-nations-economy-part-3-of-4 The Counterpart to High State Spending - High Borrowing Invariably whenever a Socialist Government embarks on a high level of State Spending, it has to fund that Spending and it is usually too difficult within the Political constraints of Western Economies to tax People and Businesses within the Economy at a level that would cover all the Spending (and to be fair that would make little sense anyway because a CONTROLLED amount of State Borrowing can be worth doing and affordable provided that the Economy is growing at a sufficient rate), and as a result the Government has to borrow money by issuing Bonds.
It’s pretty darned rare for me to write a Blog about Macroeconomics but with all the Brexit turmoil and the fears of a Labour Government run by Jezza Corbyn and his Marxist buddies, I thought it was a good time to write a Blog about a very simple Economic Concept that I suspect very few People really understand and it might make Readers think about what the various Political shenanigans might really mean for Economic Growth and how our Society is managed (or mis-managed most of the time !!). And of course that could impact on our Investments.
I guess it is from being one of ‘Thatcher’s Babies’ that my interest in Economics was first ignited and back in those days in the late 1970s and for most of the 1980s the Economic Debate was very much at the forefront and it is only in more recent times in the ‘Goldilocks’ years (‘not too hot and not too cold‘) of the 1990s and up to the Credit Crunch in 2008 that Economics rarely seems to get much proper coverage in the Media and I wouldn’t be surprised if many People just latch onto Left Wing and Right Wing Politicians on the basis of them being ‘Nasty’ Individuals or ‘Nice’ ones. Of course it really is not that simple and Political choices along the lines of ‘Left’ or ‘Right’ imply very different ways to organise Society and the Economic Structure and the Freedom or not of the Individual. Hopefully this Blog will help explain in a very simple way what the Political slants of Left and Right really mean in terms of a National Economy.
A continuing mantra you will hear and read from me is around the value that talking to other experienced Private Investors and Traders can provide. In addition, I find this is widely under-appreciated and it is probably the biggest source of Learning that I undertake these days. Indeed, undertaking the TPI Podcasts venture and being able to discuss countless aspects of Investing with someone as talented and successful as @Conkers3 is a huge help to my thinking with regards to how I go about things.
This can be on different levels - probably the main focus for me is to hear the techniques and methods other Investors use and these discussions bring ideas for potential ways in which I can tweak how I go about things in order to improve my Results. On another level, and probably of less interest to me, are the views of other Investors with regards to which Stocks they are invested in and what their take on certain Stocks is. Of course this can be hugely dangerous because it is immensely ‘Noisy’ Information and I won’t just listen to any old Tom, Dick or Fred and there are only a limited group of Investors who I do take notice of on particular Stocks and I perk my Ears up when they give an opinion. Screening out less useful opinions is of course difficult and it is only over time with experience that you can find out who is worth listening to and who just adds to your Noise levels - yet again a situation where there are few alternatives (if any) to actually going through the motions and doing your ‘time’ in the Markets.
If you have not read Part 1 of this Series, then scroll down the ‘Educational Blogs’ page and it should appear a couple of Blogs before this one. I recommend you read that first.
Moving into Cash So now that I have ‘set the scene’ with these Concepts of Controllable stuff and Uncontrollable stuff and, likewise, things we can be Certain about and things where we have no Certainty; I want to relate them to the specific Subject of ‘Moving into Cash’ but of course these concepts have wide validity across many aspects of Investing as I pointed out in Part 1. To be clear on this, I am discussing the subject of whether or not we should sell All or Part of our Portfolios before we foresee a Major Drop in the Markets coming - a bit like we have had this Year with the upcoming Brexit escape from the EU. I am not really sure how to go about writing this and as much as I know I should plan out a structure, I am not really in the mood for that so I will just crack on with it and of course vigorous use of the ‘Cut ‘N’ Paste’ function should help me sort the resulting mess into something that is almost readable. (Editor’s Note from much later - not doing an Initial Plan was a very big mistake !!)
There have been a lot of discussions on the Tweets lately around the idea of ‘Moving into Cash’ when it appears that the Markets are facing what could be a fairly sizeable drop and I wanted to discuss some of the many issues around this and some related stuff. At the time of starting to scribble this we are in the depths of Autumn 2018 which has brought some seriously major Falls in the Markets and the Brexit Talks are in full swing and going terribly - hopefully by the time you are reading this we will have more certainty on the Talks but it wouldn’t surprise me too much if the Parties involved on both the UK and EU sides are still dicking about.
How true the Paragraph above has turned out to be - I am now typing this Paragraph at the end of November and the whole Brexit thing seems to have got even worse with T May seeming to have lost touch with reality and trying to force through some sort of ridiculous ‘Deal’ where we have given away everything and £39bn for absolutely nothing in return. Unreal.
I realised that just one Checklist for the ‘WD40’ would not actually suit my needs - because I Invest in a range of Investment ‘Styles’ to ensure more Diversification. On this basis, I have decided to produce the following Checklists:
This is the Final Checklist and you can find the other ones at these Links: |
'Educational' WheelieBlogsWelcome to my Educational Blog Page - I have another 'Stocks & Markets' Blog Page which you can access via a Button on the top of the Homepage. Archives
January 2021
Categories
All
Please see the Full Range of Book Ideas in Wheelie's Bookshop.
|