Blue Line Investing, Article 2 of 12
The saying goes that when you are younger, say 25, that you should take as much risk as you can since you can afford to. But doesn’t this age typically coincide with having a smaller amount of financial resources? So if you have $10,000 to invest and earn a 10% profit, you make $1,000. Not bad. But the saying also goes that when you are older, say 60, you should take less risk, since you can’t afford to suffer a big loss. But doesn’t this age typically coincide with a larger amount of financial resources? So if you have $1,000,000 to invest and earn that same 10% profit, you make $100,000. That’s substantial. So how can these seemingly backwards concepts be turned right-side up?
In our previous article titled “Age-Baed Investing: Logical or Illogical?” we raised the question of whether investment decisions should be made based on one particular factor of time, specifically your age? We suggested the focus be redirected at the main constant that matters most regardless of your age, specifically, the stock market itself (or any other publicly traded investment), and how attractive or unattractive it may appear for investment at any moment in time. If the stock market appears to be in a topping process, should your age be a factor of consideration? If the stock market appears to be in a bottoming process, likewise, should your age be a factor of consideration? If you are a profit-seeking investor, shouldn’t your only concern be taking risk when you expect to be rewarded for taking that risk?
But how can this be accomplished? After all, no one can time the market, right? But aren’t you able to observe trends? And don’t trends form over days, and weeks and months? One of the tools that can be used to monitor trends is technical analysis. And one of the tenants of technical analysis is to look for repetitive price patterns in attempt to anticipate a possible future outcome based on past price patterns.
By utilizing technical analysis, time is effectively redefined from being your age to being how you view an investment from 3 different perspectives; specifically, a Daily perspective, a Weekly perspective, and a Monthly perspective. In our next 3 articles we will provide an example of each perspective, beginning with Daily.
Disclaimer:
Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Technical analysis attempts to predict a future stock price or direction based on market trends. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. There are certain limitations to technical analysis research, such as the risk that markets may not always follow patterns. This investment process should not be considered a guaranteed prediction of market activity and is one of many indicators that may be used to analyze market data for investing purposes. There is no guarantee that this process will be successful or will result in the projections contained herein.
Past performance is not indicative of future results. This material is intended for educational purposes only and is not financial advice or an offer to buy or sell any product. The investment strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. The opinions expressed are those of Blue Line Investing and are not necessarily those of Gordon Asset Management, LLC and are subject to change without notice. Blue Line Investing reserves the right to modify its current investment strategies based on changing market dynamics or client needs. Advisory services offered through Gordon Asset Management, LLC (GAM). GAM is an SEC-registered investment adviser. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (866) 216-1920. The principal office of Gordon Asset Management, LLC is located at 1007 Slater Road, Suite 200, Durham, North Carolina, 27703.
