New Column up at (01/22/08)

Tuesday, January 22, 2008 | 11:41 AM


I have a new Apprenticed Investor column up at, titled  "Why Bottom Guess?"

The premise is that most individuals are poorly served by trying to catch the falling knife. Instead of bottom guessing, waiting until the downtrend is broken will better serve their interests.

Here's an excerpt:

"One of the questions we get each correction is whether or not traders/investors should try to pick market bottoms. The background music is an orchestra of bottom callers, the vast majority of who are, shall we say, premature. Eventually someone gets it right, but I never have been convinced it wasn't a function of random luck.

For the vast majority of Wall Street participants, however, this guessing game tends to be rather expensive. [It] is exceedingly difficult. The ideal conditions and circumstances for bottom picking are rare, and the tools necessary to do so are even rarer. Most traders and investors do not have:

    * the requisite skill to identify these circumstances;
    * the obligatory patience to wait for these conditions;
    * or the compulsory discipline to cut losses when the trades don't work out.

For most people, the risk/reward ratio is simply not worth the capital risk . . .


Don't Just Do Something. Sit There!
Barry Ritholtz, 1/22/2008 9:41 AM EST

Tuesday, January 22, 2008 | 11:41 AM | Permalink | Comments (45) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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There is a Talmudic maxim that goes:

"Shev v'al ta'aseh adif"

Translated... "Sitting, and not doing anything, is preferred"

The connotation being that actively doing something in that given situation could be more harmful, therefore, one should just stand pat to avoid error...

This is my interpretation...But the overall theme is common sense...

Posted by: SINGER | Jan 22, 2008 12:08:33 PM

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