Be ready to jump from the trend

I read a large number of investor blogs. It is one of the ways that I find companies to analyze to see if they fit my performance criteria. One of my favorites is Michael K. Dawson.  His blog, The Trend Rida, is very well done and it is an enjoyable read. He gives advice, admits mistakes, and shows enough emotion in his writing that the articles are always interesting even when I disagree with his comments.

One of the key tenants that he and I agree on is that when the ride is over, be ready to get off. While Dawson tries to find the hottest stocks on the market he usually understands when that stock is no longer hot and it is time to move on.  This is very important as I know too many investors that subscribe to the theory of “Buy and Hold – forever” and end up paying for that devotion. Never stay with an investment too long – when the market starts to move against you then move on.

Here is a short excerpt from one of his latest columns. The column was regarding cloud computing companies and there are a few companies that he discusses that I have reviewed here. You can check out the column to learn a bit more about the movers and shakers in that industry but the point that I really liked is the opening:

In the mid-90s, I worked for a company that sold software to many of the companies in the midst of the desktop internet revolution. As I would leave the sales calls, I would call my broker to buy stock in those very same companies. Unbeknownst to me at the time I was laying the groundwork for my investment premise today.

  • Identify emerging trends as soon as possible: The build-out of the internet was a long term trend that would impact millions.
  • Buy leading stocks in trend: As investment dollars poured into the internet, the leading companies’ stock exploded as they reaped the majority of the profits.
  • Ride it as long as possible: Ride ‘em as long as they are printing money.
  • Jump off: When the trend stops going up move on.  Much easier said than done.

Never be afraid of not investing or as Dawson says: “Jump off”. You will not go broke by putting your money into a money market account that is very liquid. Hang back until you have identified a company that is worthy of your ownership and then only buy that company when it appears relatively certain that the stock price is going up.

If you have the time to read another investor blog, check out Trend Rida.

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