My New Investing Strategy: Playing Small Ball
If you had been following the 2015 MLB games, you may have noticed something different in the play of this year’s championship team, the Kansas City Royals.
Instead of chasing the home runs and the grand slams like most of the other teams, the Royals decided to own the small ball strategy. They took the opportunity to make every little play count because they believe that in the end, the inches that they fought for will add up to something big and it did.
As an investor, I can see value in playing small ball in the stock market. In fact, the more I thought about this strategy, the more I begin to resonate with this method. Starting today, I will adopt this approach in my investment strategy and see where it will lead me. Here is how I plan to do it:
My Old Strategy
Previous to this change, my original investment strategy was to only buy the stocks that I can see myself holding forever.
Although this is a very sound strategy, I have found this method to be too slow for my timeline. If I really want to meet my deadline to become a millionaire by 2020, I will need a much faster approach.
Building a passive dividend portfolio and profiting through compound is a strategy that I will implement after my goals have been reached. However, in the meantime, I think I will start to transition into a more active participation in the stock market.
Selling Isn’t the Enemy
Many people may have probably heard that too much selling is a bad idea especially when the commission fees are high. Initially, this was my thought as well. After all, Warren Buffet is an advocate to long term holding so why shouldn’t we model one of (if not) the most famous investor in the world.
Personally, I don’t think there is anything wrong in that school of thought. However, I do think that congruence is important when it comes to goal alignment.
It is no surprise that my million endeavour is one that is very aggressive. As a result, I will need to make more aggressive moves especially in the stock market.
Setting Realistic Goals
My new strategy would include selling when my goals for each individual stock are met.
Before making any purchases from now on, I will first determine how much return to expect and buy it at a specific discounted price. Once the stock price hits my expected return rate, I will sell.
Unfortunately, this is all speculation and theoretical for now but if this strategy flops, I will take it as a learning experience and move on.
Crafting the Team
Having a strong team dynamic is also important in any professional sport competition.
The first step to implementing this new strategy would be to build a list of potential stocks that I can see myself investing in.
I am thinking of building a list of 20 to 30 stocks to keep daily track of on my smartphone application. When it comes to purchasing stocks, only those on the list will be considered. Of course, as time progresses some of these stocks may be replaced by others.
As for which companies will be included in my list that is yet to be determined. I will post them when I have any updates.
I would love to hear from you. What do you think about this new strategy?
Hi Jeff, my first time visiting your blog here.
I am a little bit confused with your new strategy. So you plan to be trading stocks instead of dividend investing?
A bit more details about your plan would be nice. But it is very difficult to predict stock price movements. How will you determine what’s a good buy and sell price? Are you relying on fundamentals or technical analysis? How long do you plan to hold the stocks for, and what if you don’t get the returns you wanted in that timeframe? What happens if price keeps dropping after you buy, will you set stop loss orders, or will you keep holding?
Good luck and keep working hard!
Hi Dividend Shopper! Thanks for dropping by!
Essentially, when it comes to buying and selling, I will set a certain percentage that I will want to gain in that stock. Once the stock reaches that discount price, I will purchase and when it hits my goal I will sell.
I am trying to do a little hybrid investing here of fundamentals and technical and will hold the stock until I reach my goal. I will initially do the research to find good quality stocks to minimize the loss. I’ll check out your blog!
I’m super bad at stock prediction, and short seller. :P. I’ve found out I’m at the happiest when I buy and hold. Buy and forget type of thing.
Some people are successful at doing it with option, but recently one guy lost the whole $100k with option, I don’t imagine you do option. 🙂
Hi Vivianne! No, I wont be doing options. I’m just testing a new strategy and even if it doesn’t work very well, I’ll gain learning experience. 🙂
Hmmm – I have commented before that I think you’re setting too high a bar, which isn’t realistic. I don’t mean to be a downer, but in order to meet your goals, you will need to make some very large gambles on the direction and timing of the stock market. Certainly, some people have been successful, many others have lost everything. Why not ease into this by setting aside 10% of your investment money and seeing how you do for 6 months or a year. If you are regularly hitting it out of the park and making 20% profit per year, then more power to you. If you find it’s easier said than done, then the strategy of picking good stable, long term companies and hanging on may show it’s strength. Certainly, many of us hold onto poor picks too long or don’t take profits when we should, but for the vast majority of investors, I think trying to trade is a losing game more often than not.
Thanks for commenting Chris!
This is just a new investing strategy I will test out. I will only use a portion of my funds to test it out though just like you mentioned.
Hey Jeff, the secret about getting rich is… there is no secret.
By this, I mean to say that there is no recipe to reach a net worth of 1 million dollar as fast as you plan to reach it. Everyone who promises you otherwise, is just lying.
Unless of course your dayjob earns you a 6 figure salary of which you can save 80%.
Is there any particular reason you are in a hurry?
Slow and steady wins the race a lot more often than fast and risky.
I’m eager to hear more about this strategy if you decide to continue!
Best wishes, DfS
Hi DfS, my plan is to retire early and to enjoy financial freedom. I will be keeping updates on my blog regarding this strategy!