I’m sure most of you know what it is like to be a boss or an employee.
If you are not the boss, then all your effort goes to please the boss. And if you are the boss, all your effort goes to manage the employees. And if you are the middle manager, then you have to please your high up and manage those below you.
Well, guess what, investing is pretty much about the same thing; but there is one big distinction. It is YOUR money you are investing: therefore, YOU “should be” the BOSS.
I added the “should be” not for effect but to reflect how we let the employees (aka stocks) get away with not doing what they are hired to do- to make you money.
For those who are or were bosses, you know what I’m talking about.
On one extreme, if you are a tough boss, you pretty much have a strict guideline for the employees to follow. And if your employees don’t follow those guideline, you write them up and inform them of their deviation from the guidelines. And if they ignore your written warning, they are setting themselves up by providing you with reasonable ground for termination. Simple at that.
On the other extreme, if you are an amiable boss who care more about the employees than your company’s mission, you may become too lenient to your employees who are not productive, not fit for the job, not being a team player, and worst of all, do not have integrity. You become more susceptible to manipulation by the employees who are good at kissing your behind…
Before I go on, to be fair, there are excellent bosses out there who are both amiable and tough at the same time. And these are the bosses all companies are lucky to have.
Well, I think you have a pretty good idea of where I’m going here.
It is interesting that while most of you are/were tough bosses in the business world, you become quite an amiable boss with your stocks. Hmm…
Why do we, as an investors, tend to become the amiable boss who let our stocks get away with non-performance? Why don’t we just fire the stocks the way Donald Trump does it in the video below?
Come on now, if your mission as a trader (aka your organization) is to make profit from swing trade/short-term trade, your job is to fire those stocks that don’t perform. In other words, you need to be an extreme tough boss if you are a swing trader or short-term trader. Otherwise, you are letting your employees (aka stocks) do what they please as your company’s expense (aka your portfolio’s expense).
Hence, firing nonperforming stocks = cutting losses.
Here are some thought that may help:
Scalper: stocks are like temp; if they don’t perform, replace them immediately.
Swing trader: stocks are like new employees on probation; if they don’t perform, let them go before the probation period expires.
Position trader: stocks are like project managers; if your have sufficient evidence that the project manager is not working out after a period of time, replace the project manager.
Whatever you do as a boss (investor/trader), do NOT become the boss as shown in the video below…
In other words, do not fall in love with your employees (aka stocks).
My 2 cents.
Categories: Trading philosophies and thoughts