Jay's Simple Investing Rules

  

OPENING NOTE: The following is a check list I use in managing my portfolio. It is derived from a consensus of the strategies followed by my small group of experts, to the best I am able to discern them at any point in time. They are subject to change if the consensus of my experts changes. They are written to me, and I consider them rules because of my need for self-discipline. But you may consider them guidelines for use in any way you see fit.

They will never be perfect, as the experts rarely disclose their full and exact allocations, but they have served me well over the years. I have learned what to look for in their writings and interviews...the nuggets of investment wisdom, often hidden to the average investor, sometimes hidden to me also. Therefore, rule 1 is to begin with God. I ask Him to give me conviction and guidance, especially to reveal to me the experts to whom I should listen.

  1. Seek God's guidance and conviction concerning the investment of His assets under my stewardship.
     

  2. Buy only undervalued assets (preferably "hated" assets) identified by my experts, and to the extent possible, when they are buying them.
      

  3. Sell only when holding an asset identified by my experts as overvalued (preferrably a "bubble"), and to the extent possible, when they are selling them.
      

  4. Don't attempt short term trading, i.e. don't attempt to scalp small profits in short periods of time. Follow rules 2 and 3.
      

  5. Review my portfolio allocations before doing any transaction. If the allocations are what I want them to be, then do nothing; OR, if I believe there is some investment which has a greater potential than one I hold, sell the lower potential investment and buy an equal dollar amount of the higher potential investment in the same allocation category. In other words, make an exchange which leaves my allocations exactly the same as they were.
      

  6. If my allocations are not what I want them to be, change them. John Maynard Keynes once said, "When things change, I change with them, what do you do, Sir?" Based on the "gravity" of the changes, I make allocation changes in one of two ways. If the changes are major (dramatic) and I sense from my experts danger in not making them, I will make them immediately. The best illustration of this can be seen in Letter 19. I made a major re-allocation within 48 hours after writing that letter. The other type of change is by a series of measured steps over a period of time. This plan is explained below:

  • My portfolio is pretty much a composite of all my experts, allocated as follows as as of April 21, 2009: 13.7% mining stocks, 13.5% physical gold, 18.7% physical silver, 18.4% other physical commodities and 35.7% cash. As I have previously recommended, if you wish to replicate my allocations, I suggest you dollar cost average in measured steps and time intervals to move from where you are to where you want to be. For example, if you are under-allocated in gold and silver, buy the decided upon amount at the end of each time interval, with the following exception. Accelerate your next purchase when gold trades at 875, 830, 800, 760, 720, 650. Complete your buying if gold trades above 1000. (See A Strategy for Accumulating Gold and Silver.)  This is a plan for phasing into a maximum allocation of 30% (or whatever target you choose) for gold plus silver. You will note that the 875 level on gold has already been hit, so under this plan you would add gold or silver now.
      
  • In a similar fashion, if you hold any stocks other than mining shares, this is a plan for phasing out of them in measured steps and time intervals, beginning now. I would suggest accelerating your sell steps if the Dow hits the following levels: 8500, 9000, 9500, 10000, 10500. Complete your selling if the Dow hits 6500.  These are arbitrary, and can be changed based on your conviction.

I would use this re-allocation plan, and this is not easy to explain, after I had suffered significant losses due to failure to re-allocate sooner. It is an attempt to increase the probability of making the best correction possible.

  1. Never sell any investment without considering the tax effects of the sale. This rule can be ignored when the sale occurs in an IRA, 401-K or other deferred tax plan.

 


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Biblical Economics - what most people don't know the Bible teaches about economics
All I Have Commanded - an exhaustive list of what Jesus expects of His followers

WORDS WE HOPE TO HEAR ONE DAY
"Well done, good and faithful servant; you were faithful over a few things,
I will make you ruler over many things.  Enter into the joy of your lord"
(Mt. 25:21 NKJV)

 WORDS ABOUT INVESTING
If you have not been faithful in the unrighteous mammon, who will commit to your trust to true riches?" (Lk. 16:11 NKJV)

WORDS OF WARNING
The Apostle Paul wrote, "Now godliness with contentment is great gain. We brought nothing into the world and it is certain that neither can we take anything out. So having food and clothing we will be content with that. But those who want to get rich fall into temptation and a snare and into many foolish and harmful desires, that plunge people into ruin and loss; because the love of money is a root of all kinds of evil; in their greediness some have been led away from the faith and have impaled themselves on many distresses." (1 Tim. 6:6-10 NKJV)

 TERMS OF USE
This information is public domain.  Jesus said, "Freely you have received, so freely give." (Matthew 10:8b)

DISCLAIMER
The information in these articles is the responsibility of Jay O'Keefe and Ted Spaeth, but all your decisions are your own responsibility.


This web page was last updated on 02 May 2011 .