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The Investing Process

The Investing Process. Thomas Robb Morgan Stanley. Outline. Investment Strategies Idea Generations Resources Paper Trading Real Accounts. Portfolio Management. What to buy When to buy How much to buy When to take profits When to stop losses. Investment Strategies . Value

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The Investing Process

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  1. The Investing Process Thomas Robb Morgan Stanley MSU Student Investment Association

  2. Outline • Investment Strategies • Idea Generations • Resources • Paper Trading • Real Accounts MSU Student Investment Association

  3. Portfolio Management • What to buy • When to buy • How much to buy • When to take profits • When to stop losses MSU Student Investment Association

  4. Investment Strategies • Value • Growth / Momentum • Trend Following / Technical MSU Student Investment Association

  5. Value Investing • Investing in undervalued securities • Screen for low multiples • P/E < 10 • P/B < 1 • Distressed/Underperforming industries • Shipping • Housing • Solar MSU Student Investment Association

  6. Growth & Momentum • Investing in companies that are growing earnings and sales • Momentum • Accelerating growth • Increased institutional ownership • Can be riskier • Valuation based on growth • Poor earnings can cause price to plummet MSU Student Investment Association

  7. Screens • No “Perfect” Screen • MagicFormulaInvesting.com • FinViz.com • Multiples • Leverage • Growth • “Value Traps” • Undervalued does not mean buy • Additional research • Wait for turnaround MSU Student Investment Association

  8. Trend Following • Invest on price action not fundamentals • Cut losses, let winners run • Buy as prices break higher • 20 Day for Commodities • 20 Week for Equities • Sell as Trend Ends • 10 Day/Week • Also works for Shorting MSU Student Investment Association

  9. Resources • Investors.com • Stock Research Tool • Articles • Screen of the Day • SeekingAlpha.com • Macro View • Long & Short Ideas MSU Student Investment Association

  10. Resources • FinViz.com • News > Blogs • AbnormalReturns.com • Markets • Strategies • Companies • Economy • StockTwits.com MSU Student Investment Association

  11. Resources • Charts & Watch Lists • FreeStockCharts.com • News • FinViz.com • Finance.Google.com • ETFs • ETFdb.com • ETF.stock-encyclopedia.com MSU Student Investment Association

  12. Questions? Next Up: Portfolio Considerations MSU Student Investment Association

  13. Position Sizing • Volatility Adjusted – Average True Range 1% of Portfolio Position Size in Shares Average True Range • More volatile shares have lower weighting • Each investment should contribute same value to portfolio MSU Student Investment Association

  14. Diversification • Equities • Removes security risk • Industries • Trends (global growth / inflation) • Commodities • Precious Metals • Energy • Agriculture MSU Student Investment Association

  15. Managing Losses • The more you lose the more you have to regain • Minimize permanent capital loss • Percentage Stop (8-10%) • Volatility – Multiple of ATR (.5 – 2) MSU Student Investment Association

  16. Questions? Next Up: Trading MSU Student Investment Association

  17. Paper Trading • Necessary Step in Investing • Test strategy • Make sure you can make decisions • Practice managing portfolio • UpDown.com • Is strategy practical for real account? • DO NOT MOVE ON UNTIL YOU’RE PROFITABLE MSU Student Investment Association

  18. Real Accounts • Minimize Trading Costs • Discount Brokers • Scottrade.com • Zecco.com • SpeedTrader.com • Reduce turnover • Consider taxes • Short-term capital gains • Cannot remove money from IRAs MSU Student Investment Association

  19. Review Trading • Are you sticking to your strategy? • Are you making money? • Beating index? • Where are you making money? • When are you losing money? • Are you missing opportunities? • HOW CAN YOU IMPROVE? MSU Student Investment Association

  20. Questions? MSU Student Investment Association

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