As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Saturday, 21 March 2015

Our Desired Investing Outcome: The Pareto Principle (80/20)


Read? The Pareto Principle (80/20) Investing Strategy


Uncle8888 wrote this in ..

Sunday, 2 September 2012

Investors. Know at least Pareto's Principle


Pareto Principle ~ “20% of the effort generates 80% of the results.”

Market Timing vs. Time in Market???
Fundamental vs. Technical Analysis?
Short-term Trading vs.  Long-term Investing???

For long-term investors, we should be observing Pareto's Principle.

80% patiently waiting for Market Timing and then spend 80% Time in Market with 20% of our effort will generate 80% of the results.

And then we spend another 80% market timing for next cycle.

Read?  Laws Applicable To Investing

------------------------------------

Quoting the wisdom from this man, Rolf SueyMarch 20, 2015 at 9:48 AM

@Investment

this principle applies, but it is an outcome. It cannot be use as a strategy.

Since every investment before u press the buy button is ur top priority. If u have 5 stocks, u cannot say my priority is only 1 or 2 out of the rest.

I guess that maybe what B is trying to say is now he is only focusing on few stocks only with higher amt vested in each stock. And this is good enough for him getting good rtn.

but if 20/80 strategy applies... then out of ur 10 stocks, only 2 will give u good money. then how sure are u that it will comes from ur top holdings?


--------------------------------------

Uncle8888 fully agreed. It is an outcome and NOT a strategy.

BUT, this should be our desired investment outcome after XX years of investing in the stock market. We should be proving this principle RIGHT!


How?




Uncle88888 is quite sure that we are going to prove this principle WRONG by selling our winners sooner; but holding on our losers for the longest possible time before we are forced to sell.


Our investing strategy will likely to determine our investment performance outcome after X decades in the stock market. When our strategies are NOT rightly executed; they will NOT lead us to our desired outcome - The Pareto Principle ~ 20% of the effort generates 80% of the results.”

 




7 comments:

  1. Me also think 20/80 or whatever is the outcome of most happenings but someone said,

    "Approximately 99% of the time, the single most important thing investors should do is absolutely nothing."

    i believe it's true what ever your strategy is.
    MARKET TIMING - ANYONE?

    ReplyDelete
  2. After 10 to 20 years of investing, if our portfolio is not something close to Pareto Principle outcome. Something is not right?

    ReplyDelete
  3. Actually don't have to wait for 10 or 20 years, because after your portfolio survive the bear to now the bull phase, and most of your holdings still red in colour, you are quite cooked already. By theory and practical, every B/B cycles your portfolio should show more black colour holdings than red; It doesn't matter whatever investing strategy you employed.
    My 2 cents.

    ReplyDelete
    Replies
    1. After every B/B, must be 80% Black 20% Red; then OK

      Real test result

      Delete
  4. Hi CW,

    "Uncle88888 is quite sure that we are going to prove this principle WRONG by selling our winners sooner; but holding on our losers for the longest possible time before we are forced to sell."

    Your above statement is so so true. No matter how rational or how many books we read, or how much we learn.. we still make the above stupid mistakes...

    I am still holding on to my losers and thinking of averaging down... And the worst is selling my winners to use he amount to average down the losers... Worst!

    Thanks for this IMPT reminder... I know what to do on Monday once market opens! Gum Siah..

    ReplyDelete
  5. Why we all do that? i think it's never easy to let go our EGO. Neuro scientist has experiment that we will invest badly because of our EGO. In investment we must have no EGO. But how?

    ReplyDelete
  6. add a letter N.

    EGO will be GONE!

    just for laugh!

    ReplyDelete

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