Better Sleep June 18, 2006

Paul Van Eeden has some good advice for investors — and it should help you sleep better (and it’s not limited to his gold stocks!):

This is where the Better Sleep Principle comes to play. I had not really thought about it but I have for many years now subconsciously followed the Better Sleep Principle in my own investing. It works like this:

If I start worrying about something when I go to bed at night I fix it the next morning. For example, if I own too much of a stock and am concerned about what would happen if the price falls, I sell some. If I don’t own a particular stock and I lie in bed worrying that the price would go up before I get a chance to buy it, I buy some. I do whatever it takes to make me sleep better at night.

Here’s why you should follow your own instincts to make sure you sleep well at night: it doesn’t help if you follow someone else’s advice and they sleep well while you lie awake. Investing is a very personal endeavor; only you know what you need to do.

Find your own investing style, and your own comfort level.

Go With the Flow June 6, 2006

From Deron Wagner this morning:

We pointed out the Real Estate ETFs because that sector showed the most relative strength to the broad market yesterday, but we also wanted to convey just how difficult it is to be long in the current market environment. Even when you pick the right sector, a difficult enough task in itself, the selling pressure from the broad market is probably going to prevent the sector from rallying in any significant manner. This is why we simply follow the primary trend of the broad market rather than fighting it. Just as water flowing down a stream will always follow the path of least resistance, so too will the stock market. If there is more supply than demand, stock prices will move lower, regardless of how much it may have already fallen. Therefore, we hope you have been following our advice to avoid the long side of the market or, at the very least, have been trading with reduced share size and only on a very short term basis to play counter-trend bounces. If you’re net short right now, the market is giving you a lot of room for error with choosing the proper sectors and even the proper timing. This is why it is always easier to profit from a stock market that is trending steadily in either direction; you can make a few mistakes and often still come out on top just as long as you are on the right side of the market.