Gerald M. Lobe. The importance of accurate timing

Gerald M. Lobe. The importance of accurate timing

Gerald Lobe made his name as a first-class specialist in the sale of securities, and the magazine "Forbes" once called him "the most quoted man on Wall Street." His book "The Struggle for investment survival" (The Battle for Investment Survival), published in 1935, considered a classic, and the first edition sold out in 250,000 copies. The main reason for its success - the book written by a living, accessible language, which does not require suchmental abilities, as published in the 1934 book by Benjamin Graham, "Security Analysis." The strength of the Lobe - mass marketing, giving you the opportunity to become an ordinary Joe investor. Consider the following metaphor for facing the novice investor: "A person should limit their initial efforts on food preparation by cooking the eggs, and no one starts with a meal," Baked Alaska ", regardless of what a great dessert can happen later."

Lobe, whose father is a French wine merchant, lost his business during the earthquake in San Francisco in 1906, began investment career in 1921. His first job was to sell bonds, and it is known that refused to sell any security, to which he had no confidence. A few years later he was working in New York by "JF Hutton" (E. F. Hutton & Co.), Where he made partner at a young age - 30 years. Like some other fortunate Lobe foresaw the collapse in 1929 and sold all of their deposits and deposits of its customers before the crisis. In the same year he was appointed deputy chairman, a post which he held until his retirement in 1965. In the 30th and later years, he distinguished himself by being sensible seller of securities in a worn and battered industry, and he wrote several books and conducted in a national newspaper column called "Lobe on Wall Street."

Despite the fact that he worked for a brokerage firm, Lobe has rightly said: "People expect too much from the investment. They are wrong who think that their money will always be" work. "According to Lobe, those who delayed and was able to limit their losses inflation , things went well. While his books have been criticized for lack of technical guidance, he compensated for this practical advice: "Journey to an excellent education, and education today - it's a great hedge for those who can benefit from it benefit" . In "The importance of accurate timing," Lobe offers some pragmaticheskoe understanding why the mindset of the investor makes a sale more difficult than buying.



Once security is purchased, the buyer loses the opportunity to avoid decision. He must decide whether to sell or keep, inexorable consequence - the percentage of correct decisions should be reduced. Therefore, a reasonable investor would believe that will make far more errors when closing deals than when they are opened.

When the hands have nothing but money is not required to take any action until the conditions will not be entirely satisfactory. Or present a good opportunity to buy wisely, or all the "pros" and "against" get together so that nothing is done nothing. The worst that can happen if the last decision made, is that due caution would be missed opportunity, but it is insignificant nuisance At one time there will be other opportunities and if the ratio of investment to speculation and formed in accordance with the described course of action. .. Nothing will be lost, nor the possible earnings, nor peace of mind.

Another reason for selling at the right time is more difficult than buying in that frame of mind development, which sought only the really good bargains, bears tend to too rapid loss of confidence. Periods of high prices and over-reliance of public, quite naturally, can be followed by periods of depression, which often happens. So it is very good for general business conditions usually follow a very poor conditions. In these active periods of the shares will be sold at an exorbitant cost, promotion of their prices will often outperform even the most optimistic expectations of those who bought very early and at a very low price. Last start to feel anxious uncertainty of his situation, as soon as back to normal value or when the first symptoms seem excessive prices.

For these reasons, the basis for a reasonable liquidation can not be described simply as the reciprocal movement of factors that have created the possibility of actually buying. This would be more possible if we were discussing the appropriate time to carry out short sales. What we do here, this is not opening and closing an already open position. Many shares are a poor long-term assets, not being clear with short sales.

Other situations may require a decision on the sale. The favorable developments, it is expected when buying a security may not justify the initial expectations. Or a shareholder may incur losses if it is sold.

In each case, you can install a mechanical rule to follow. Of course, use common sense and logic, and possession of accurate information in more than adherence to any formula or system that is the foundation of all successful investment, sensible policy - it's out of long positions, beginning to have a bad falling in price. This is only an automatic procedure in the securities, the only procedure that requires no discussion.

Losses should always "cut down". They need to stop quickly, long before they lead to any financial consequences. After the liquidation of shares in a transaction in a sense to be forgotten. It should be completely excluded from future consideration, so that there are no sentimental obstacles to the recovery position at a higher level - immediately or later - if the purchase is again very reasonable.

Reduction of losses only rule of markets, which can confidently teach that to do so - is always right. In terms of arithmetic, any high school student can learn the rule. But in terms of actual use, it requires a complete detachment from human weakness, which happens very rarely. People love to return and do not like to incur losses. They hate to buy something new at a price higher than that at which they sold. Human likes and dislikes will destroy any investment program. To avoid failure, we should listen only to logic, common sense, knowledge and experience.

Not only can say some of what should be the procedure when the question is whether or not to take profits. A reasonable practice - implementation of 100% profit since at least part of a larger commitment. This profit is equivalent to the dividend for 16 straight years in a 6-percentage basis, with no compound interest and without amendment on taxes. If a doubling of investment possible for a period of six months to a year, an investor can easily enter into a long period. In this case, the money will remain unoccupied (up until the next opportunity will not be presented), without reducing the final results to a position close to total disaster - often a net loss, as a result of continuous investment vcex funds.

It is reasonable to always have on hand a reserve fund reinvested to take advantage of unexpected opportunities. The need for purchasing power in such cases, may itself be a factor in dictating the sale of existing securities. Probably the best way to understand the moment to sell it to analyze what happened with the position since its inception. The belief that purchasing stock in the range, the base for a small initial purchase. If the stock falls, it should sell fast and with small losses. But if the stock increases, and indicators that supported the initial purchase, continue to remain favorable, you can make additional purchases at prices that the buyer still finds unusually low. But once the price reaches the limits considered normal or too high, the number of available shares on the growth of quotations should be steadily reduced.

More accurately, perhaps, correct technique is not to describe the sale.