Re: Investing

From: Dennis Fantoni (df@tdc-broadband.dk)
Date: Thu Jun 12 2003 - 00:23:03 MDT

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    > My advice now, to myself and to my friends and family, is to stay long.
    > Never go short and never sell unless you really need the money. Own a
    > reasonably but not overly diversified portfolio. In the long run the
    market
    > rewards investors according to the level of risk they take (on the long
    > side).

    Good advice.

    Add to that the following worstcase evasive measures :

    Do not have all stocks in one account. Try to diversify to 2 or 3 accounts
    located in different countries.
    Try to hold assets denominated in several currencies / minerals.
    If You hold large amounts of cash, try to diversify into a few different
    currencies.
    If You have enough money to make transactions a small part of the overall
    picture, consider having some money placed overseas, controlled by another
    juridical identity.

    The problem is, of course that You cannot trust the government where you
    live to be stable over long periods of time, and having everything in one
    brokerage account, and denominated in one currency could get you a total
    wipeout.

    You mentioned a statistical test of a trading system. My plan is to divide
    my historic data into several sets, and then test and build my systems using
    only one set of data. I will then verify the systems on another set, and
    perhaps double chenk with a third set of data. For that to work i will have
    to split up the sets in a few years each, or split up the market in three
    pools of stocks, all spanning the entire period.

    If i create 10 working systems on dataset1, then if only one works with
    dataset2 it is probably just a random accident. If 9 or 8 works, i might
    have discovered some anomality that existed in the datasets in that period.
    Of course i will never know when the anomality goes away.

    I have downloaded and i am in the process of reading about 300 scientific
    papers on the subjects of money management, investing, futures, options,
    neural networks, stock trading schemes, statistics etc. I don't think i will
    finish anytime soon, but i get wiser every day at least. I have identified
    the need to learn some more statistics, so i am looking forward to enrolling
    my next degree ( where statistics is one of the courses ).

    Fun, that You mention gambling (on the wrong side of the counter) as a
    possible venue of income. I have found several non-effective markets in
    gambling and have profited from a few, although not much money. If it is
    possible to get a positive income from gambling , it should be possible to
    live on investing too, given a reasonable amount of capital for investment.
    Or perhaps the stock markets are effective but gambling markets are not? If
    so - how can that be? Perhaps only stock markets of stocks with an average
    volume above xx are effective? Or perhaps different stock markets (different
    groups of stocks defined by average trading volume) are effective on some
    scale going from totally non-effective to effective within 1% of actual
    value?.

    Dennis



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