Robert Pavlik from Oaktree Asset Management was on CNBC and made a comment in passing about under performing stocks. He seemed to be generally bullish but made a comment, in context of giving generic advice, about investors perhaps selling some under performing stocks.
Be careful with that one.
If everything you own is going along for the great ride up we have had, what do you suppose will happen when the market turns?
One aspect of being truly diversified is that no matter what is going on you always have some stocks going up and some that are going down. Hopefully the mix of what is going up and what is going down is such that returns are reasonably close to whatever benchmark you use.
I am not saying Mr. Pavlik is wrong but his comment has the potential to be misconstrued leading people to take action that results in becoming overly exposed to whatever is perceived as being hot.
As I look at client portfolios in any given quarter there are always stocks that are white hot and some that seem to be wilting. This can happen to companies when the fundies change or when they do not change. Selling a stock that is "wilting" when there is no fundamental change is probably not a great idea.
Becoming impatient with an ETF or fund that seems to be lagging is probably an even worse idea, assuming the portfolio is intended to be diversified.
It is very easy to get caught up in the action of the stock market, feeling like you have to do a trade. For the vast majority of people this is not the way to go. What makes this complicated is that occasionally something does need to be sold either for good reasons or bad reasons.
I think the best way to go about this is to have some sort of game plan going in. Generally when I buy a stock I hope I can hold it forever. This does not always work out. I am a seller when something grows to big (this is a good), I am a seller if a stock does not capture the things (like sector or country) that I think it will and occasionally I am a seller when I want to reduce exposure to a sector for top down reasons that might have nothing to do with the stock.
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5 comments:
This is of topic.I trade using the internet, and I am concerned about my password etc. being hacked.I have tried to find out what my broker's policy is about liability if hacked, and I am getting a run around. My broker is Seibert. Does any one have more information regarding liability if hacked at other brokers or advice regarding this issue. Thanks Ron
Ron, it would seem that the answer to your question lies within your account agreement. Why don't you get a copy of that and then consult with your personal attorney. I would be surprised if any here (no offense to any) can give you credible advice.
If this is a real concern, then perhaps you can implement procedures that ensure (1) the computer that you log on from is secured by a password that you routinely change; (2) you change your log on password with your broker on a systematic basis; (3) you have appropriate firewall protections etc.
I'm not sure that your broker will readily accept any responsibility if you've not taken minimum steps to safeguard your system.
I haven't really changed anything much in the past 8 months but have allowed some hedges to lapse slightly: Not a lot since, despite the 'relentless' upward bias of the stock market, the risk/return ratio remains rather poor.
WRT passwords I have no expertise in the legal aspects but am inclined to doubt any online business would have a policy that simply made a user whole who had their ID and password stolen; there are just too many ways to get that information from the user by other means; i.e., physical burglary aside I can think of at least five ways to hack an id/pw -- brute force, dictionary attack, social engineering (includes phishing), trojan application, and server intrusion -- and the last is the only one the vendor could reasonably have any responsibility for I would think.
That said I would think any online broker would be willing to discuss what measures they have taken to assure security at their end even if that may not actually improve any one's comfort level. For example, Schwab states flatly that they will cover 100% of any losses in any of your accounts due to unauthorized activity but then come the inevitable qualifiers that make it fairly clear that you, the user, are expected to notify Schwab if you suspect said "unauthorized activity" and you may also be placed in the position of having to prove you were not at fault; e.g., your browser was up-to-date, you had virus and malware protection, your passwords were sufficiently complex and unintuitive, etc, etc.
In my own experience hacks are quite rare but I did have to implement a credit alert just a few months ago when I received a letter from my alma mater informing me a database break-in may have compromised my personal data (and that of thousands of fellow alumni). I'm more technologically literate than most and maintain fairly robust security procedures but bad things can happen anyway so I tend to spread my financial action over multiple vendors to assure no single break in can damage me excessively. FWIW
Here is Fidelity's idea of index funds that: "...tracking the index as closely as possible and keeping expenses as low as possible.
Now Fidelity is introducing three enhanced index funds which use an investment approach that builds upon the basic principles of index investing - low costs and low tracking error — by adding the opportunity for better performance."
http://personal.fidelity.com/products/funds/content/WhatYouCanBuy/enhanced_index_funds.shtml.cvsr?fca_id=20070970p11
Roger. Have you ever heard of this type of index funds that 'seek to outperform the index' while still tracking their index?
while I'm not sure if I have heard of this before in an OEF the concept does not not seem that odd.
They obviously have something in mind strategically. If the goal is something like beat the index by 100 basis points with a slightly lower standard deviation than the index...
Doesn't seem odd. Whether they can do it is a different matter.
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