Trade the media talk for your own stock codes
From the low on June 4 to the high of a couple of weeks ago, the market had jumped 29.56 per cent and clearly a lot of people are now thinking that enough is enough.
Volatility is up, the S&P ASX 200 Index has moved more than 50 points eight times in 25 days and has crossed the 5000-point level seven times. A sure sign of a herd that has had its run and is now pawing the ground, wondering where to charge next.
And while it makes its mind up, I and every other commentator are talking and writing endlessly about "the market".
In the past month we have all rather laughably become experts on Cyprus, making one profound declaration after another from a position of no insight or knowledge beyond what everyone else has read. Regurgitating what's just happened and why and icing it with a bit of harmless commentary and utter guesswork about what's going to happen next.
The market debate absorbs untold hours of financial effort. The newspapers are full of it, the TV commentators obsessed with it, the economists talk about nothing else and even I find myself obliged by my members to constantly refer to "The Market" and what is going to happen to it next.
When investment boils down to what stocks you hold when and whether they are going up or down you have to ask, are we all wasting our time taking about the market?
Really. If all the kings and queens, presidents and heads of state, the central banks, banks, investment banks, regulators, CEOs, brokers, fund managers, financial planners, accountants, investors and even the taxi drivers didn't know there was going to be a global financial crisis, then what hope have you or I of making an accurate call on what happens next?
Yet this is what the market debate implies, that we are building up to some big decision to either buy or sell the market.
But let's be realistic, making that "big call" is almost impossible for the average investor. Are you really going to make a decision to sell all your stocks at once or to invest all your cash at once. It'll never happen. The magnitude of the decision means it never gets made because its too onerous, its too big a decision; and because of that, despite endless hours of high brow about the market, most investors are constipated by inaction, or, more likely, acting far too late, like selling in the depths of the GFC or buying on the all-time high.
Sorry, but anyone who allows themselves to be distracted by a potentially valueless macro debate hasn't really worked out what making money from the stockmarket is all about. It's about the stock codes on that spreadsheet, the number of shares, the current price, their current worth and that number at the bottom that adds them all up and tells you what you're worth. The market is bunkum unless you actually trade the index, which few people do. In which case your time will be far better spent dealing with "stocks", with the stocks that you hold, and through that you'll find the market calls are made for you.
By listening to the charts on individual stocks, selling individual stocks as their up trends end, or buying individual stocks as their down trends reverse, you are incrementally going to make a call on "the market" without having to. You don't have to make a "big call"; it is made for you. And by the time you hear about a market correction on CNBC, a correction which leaves all the "moron portfolio" investors in a cold sweat about whether they've left it too late to sell, you will have sold everything already.
Turns out that the way to time the market is not to try to time "the market" but to try to time individual stocks and, in so doing, "the market"; then your portfolio timing will take care of itself.
It's a heck of a lot easier to break the big decisions down into a lot of little ones.
Frequently Asked Questions about this Article…
Recent market volatility—for example the S&P/ASX 200 moving more than 50 points eight times in 25 days and crossing the 5,000-point level seven times—shows markets can bounce around a lot. For everyday investors that usually means it’s more important to focus on the stocks you actually own than to get swept up in headlines. Volatility is normal; the article suggests using it as a signal for individual stock decisions rather than trying to predict large macro moves.
The article argues the media market debate is often overdone and based on regurgitated headlines. Commentators can lack real insight, and constant macro analysis can distract you. Instead of reacting to every global headline, concentrate on the fundamentals and price action of the stocks you hold.
According to the article, making a single big call to sell everything or invest all your cash at once is almost impossible for most people. Those large, all-or-nothing timing decisions are onerous and often lead to inaction or to acting too late—such as selling at a crisis low or buying at an all-time high.
The article recommends timing individual stocks instead of the whole market. By watching charts for individual stock uptrends and downtrend reversals—selling as uptrends end and buying as downtrends reverse—you make many small, incremental timing decisions that collectively time your portfolio without having to predict macro moves.
‘Trade the stock codes’ refers to focusing on the specific holdings on your spreadsheet: the ticker codes, number of shares, current prices and the total value. Paying attention to your actual stock positions keeps you grounded in practical portfolio management rather than abstract market commentary.
The article notes that most people don’t actually trade the index, and calls the broad ‘market’ debate bunkum unless you literally trade the index. For many everyday investors, time is better spent analysing and managing the individual stocks they hold.
Breaking big decisions into lots of smaller ones makes actions manageable and reduces paralysis. Selling individual stocks when their uptrends end or buying them when downtrends reverse creates a series of practical, incremental choices that add up to effective portfolio timing.
Practical steps from the article include: keep a clear spreadsheet of your stock codes, share counts and current values; use individual stock charts to spot trend changes; sell stocks as their uptrends end and consider buying when downtrends reverse; and avoid trying to call large macro moves—let your stock-level actions collectively time your portfolio.
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