Before I
started to invest in the stock market, I studied trading in great detail,
especially as it pertained to the futures market. I learned a lot of traders
insisted on using price stops called ‘stop losses’ in order to help them manage
their risk and limit their downside losses on trades that turned against them.
In time
I learned that short-term trading wasn’t for me but I did pick up some unique
ideas from my study of trading the futures market. One was an aberration on the
stop loss idea…One trader advocated the idea of using ‘time stops’ in stead
of price stops, in other words, instead of selling out your position when it reached
a certain price level, one would hold on to it after a certain period of time
and re-evaluate. This idea had instant appeal to me as it was different
from the conventional wisdom and took the emotion out of the trade.
After a
few years of investing in the stock market, I have resurrected this idea and am
currently using it in the management of my investment portfolio. When I now buy a
stock I tell myself I am going to make at least a three year commitment to
holding my position. This has the benefit of making me a lot more discerning in
my selection of stocks I want to buy. When I know I am committing to a
stock for at least three years I try to make sure that I really want to own it.
Of course sometimes shit happens and I sell out before my three-year time-frame,
nevertheless my mandate is to hold on to my position for at least three
years and then re-valuate my situation. This has improved my overall
investing as it acts as a filter to my initial buying process and
essentially anchors my whole investing philosophy.
Recently
I sold half my position in Stantec Inc (STN), and together with the little
money I had in the cash account of my portfolio I bought a few hundred shares
of Blackberry Ltd (BB)…The investing thesis for Blackberry is covered in the
blogpost below…
I first bought Stantec in January of 2016, so I have held it
for three and half years. It didn’t really work out as I had hoped as I was
under water on my position and wondering if it was time to cut bait. I decided
to sell half my position in Stantec as I still thought it might work out over
the long term. Two days after I sold, Stantec released their earnings and
missed their numbers and sold off sharply, I guess I got lucky with my timing.
The three year time stop idea instills a certain discipline
in my investing and makes me think twice before I buy anything…A good idea for
any investor who focuses on the long term.
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