Investing & Trading Lessons: Part IV

When members were asked "What would you say is the most important thing you've learned about investing and/or trading in 2007?", this is how some of you responded:

• Proper risk management rules!

• Do not put too much in any single position

• Money management and investor psychology are more important than choosing the "right" stock

• Setting stops at a multiple of average true range and buying only enough shares to keep my risk per position to just 1% of my portfolio has helped

• You must adjust stops to market conditions. Oversold conditions require loose stops - overbought require tight stops

• Add money to winning trades while using trailing stops is useful

• Hope is not a trading technique

• I must learn to control my emotions (greed and fear)

• Confidence and pride can kill your portfolio

• Stay with your gut

• Don't buy because a stock looks cheap UNLESS an insider buys stock at market prices

• Trading some stocks (like biotechs) require specialized knowledge. Without it, you are only gambling

• You need to be your own person. Few are successful copying others. You need to design your own approach

• Stop taking stock tips from others and focus on finding your own method. Take all the input you can find, but base your selections on your own experience

• Advanced stock screening can work wonders

• Using low PEG ratios in my screens has improved my approach

• Stock screens and analysis are much more reliable than my instincts

• Have a plan and stick to it

• You can make good returns by letting time work in your favor. Not all trades need to be short term.

• It is helpful to incorporate different time frames for your strategy - short, medium, and long-term

• I discovered the value of using ETFs, such as the sector-short ETFs to hedge against a market downturn

• It's really hard to predict the market. The best investment strategy may be tax efficient, low fee, broad market index funds

• Buying and holding a lazy portfolio is an excellent strategy

• I can't beat the market, but it's fun to try!

• It is very hard and requires a lot of skill to beat buy-and-hold in the long run

• Long term investing requires consistent discipline, diversification, and time.

• A passive/lazy portfolio with a stock component is probably the best bet for someone who can't follow the market full time

• It's corny but always stay diversified. However, holding forever is lousy advice

• Short-term strategies often require constant attention. I have learned to scale and change my strategy to the time I can realistically spend and still have time for other more important things

• I need to maintain better discipline that coincides with my longer term perspective. This is especially true in volatile markets that often cause me to make emotional decisions and react with a short-term trading response

• I've learned to ignore my short-term hunches and trust my long term instincts

• Know matter how much you think you already know, there is always more to learn

• Get plenty of sleep

To view the others, please go to Part I, Part II, & Part III. I hope you enjoyed reading them as much as I have.

*  You may also find it also interesting to compare and contrast this year's lessons from those submitted a one year ago. See my Stock Market Lessons of 2006:  Part I, Part II, & Part III