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Five New Year's Resolutions for 2008


Take the time to reassess your investment decision-making process and start 2008 off on the right foot.

1) If you have a good idea, go for it.

How many times have professionals and individual investors done the hard work and research but failed to really make money because the investment was too small to move the needle. Of course the opposite can be true so if your tendency is to be too big ignore my comments. Most institutions should limit their exposure in an individual stock to about 5-7%. For individual investors you should use a 10% position limit as a general rule of thumb. If you work for a public company and your company's stock is an investment option in your 401k use common sense on how much to allocate. Remember Enron employees had the same type of plan. *&^% happens even to the best of companies.

2) Do not buy back a stock you sold for at least 30 days.

Very often investors are stopped out of a stock or sell because deteriorating fundamentals dictate a sale. How often have you bought back the same stock days or even hours later? Maybe the bad news doesn't hit right away and as the stock recovers we feel the coast is clear. We can't bear not to be in the name so we jump back in. Of course the inevitable happens and the bad news you projected comes out and the stock takes a hit. Great research has to be accompanied by great execution. Unless you are trading the daily volatility of a few stocks, you well know this is a good rule.

3) Don't swing at pitches that are in the dirt.

Let's eliminate the compulsion to trade everyday. Take a lesson from baseball's greats. The first thing you notice about great sluggers is they don't swing at every pitch. My good friend Rob Funk of RGF Capital always tells me to look for that 3-0 pitch right down the middle of the plate. Remember the market will continue to serve up investments that are low and away. Wait for the right setups. Establish your rules and stick to them.

4) Give yourself a break.

Turn off the financial TV news for at least 1 hour every day to establish your own thinking. The job of TV news is not to help you make money but to sell advertising. The only way they can do that is if you are watching. Inflammatory words are constantly used to keep your interest. You know, words like plummeting, soaring, skyrocket, and others are used to describe even the most mundane moves.

5) Take some time off when your strategy is going well.

Markets and performance can be volatile. Get away from your trading screen every now and then when your investments are working. There will be plenty of nights you will have to burn the midnight oil when they aren't.
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No positions in stocks mentioned.
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