Don't Buy Apple, It's Too Cheap
I am bullish on Apple, but I love the negative market sentiment. That's because I want to build an Apple position at the best possible price.
Am I greedy? You bet I am, and I always want to buy at the best possible price. Sometimes, though, you can get too greedy, and wanting to buy much below $500 feels very greedy indeed.
We know most investors are not comfortable positioning against the price trend. It's almost as if the price is too low to buy.
Forget about novice investors -- even many experienced investors want the false comfort of positive media attention directed toward stocks they're interested in.
I'm an active trader who fades extreme price movements, and in order to be successful I follow strict rules of entry and exit. I bought my first stock in the 1980s, and after all these years of investing, I don't enter into a position without knowing my estimated edge, profit target and stop-loss level. Looking at a simple price chart doesn't get me there.
I know my entry and exits points because I have spent lots of time back-testing and calculating the odds as best I can from historical results. I have spent tens of thousands of hours analyzing charts, and I still use precise entries and exits.
Do you believe the typical part-time investor looking at a chart will have an edge over professionals who know the fundamentals of any given company and know the likely price action with any given chart pattern?
Big money doesn't hold all the cards, though, and as a retail investor you have several key advantages over the big guys. Don't make the mistake of discounting your advantage along with your ability to outperform fund managers. Rules are a must, but you don't need a committee meeting to exit a position (unless maybe the committee includes your spouse).
Retail investors decide what percentage of their portfolios to allocate to any given stock. If Seagate (STX) is growing relative to your other holdings because it's trending faster than the rest of your portfolio, you don't have to rebalance unless you want to. It's not an excuse to be reckless, but flexibility and quickness are key advantages.
Timing is maybe the greatest edge the average investor has over large fund managers. Retail investors can pick and choose the time frame for any given position. For example, in "BlackBerry Isn't a 10 for Investors" I suggest that Research In Motion (RIMM) may be bought for a gain, and then sold or shorted for another gain when the BlackBerry 10 is released.