A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.
Do you believe random walk? Or do you follow your own research? Or maybe experts recommendations?
Early this month I mentioned in my net worth update that I have been using Zecco account to do some trades recently and made a small money from the activities. Here’s what I am doing with my so-called “play account.”
When I opened my Zecco account in the summer of 2006, I was thinking of using it as a play account because of the commission-free trades it offers. For a play account, I plan only to put a small amount of money in it and play with the mo so even if I lose it all, it won’t hurt too much. If I can make any money from it, then good for me, though it won’t prove anything other than some luck.
I didn’t really start to play with the little money I have in my Zecco account until February after I published my first The Dog of the Chinese ADRs. Initially, I thought I would buy the Chinese ADR that performs the worst in the previous month and hold it for one month, then sell the stock at the end of the month and buy the next worst performer. Unfortunately, I didn’t keep up with this method, though I did trade a few Chinese ADRs in the past couple of months without doing any research (random?). I just bought the stocks when I had the money and sold them when the profit was acceptable, no really holding the stocks for a month as I originally planed.
Anyway, I made a total of 7 trades in my Zecco account in March, more than I did in the entire 2007 and made a little over $111 profits, a gain of more than 14%. Stocks I bought and sold since February include:
Global Sources (GSOL)
Xinhua Finance Media (XFML)
And stocks I am currently holding are:
China South Air (ZNH)
WSP Holdings (WH)
Agria Corp. (GRO)
For me, I think I have no problem deciding when to buy a stock. The problem is when to sell. For various reasons, I am always reluctant to take profits off table when I should. For example, one of my biggest holdings China Life Insurance went to a record high of $106 a share in late October 2007. I didn’t sell any shares when the stock, like many other Chinese stocks traded in U.S., was clearly going down since. Now LFC has lost nearly half of its value, taking away a big chunk of my paper wealth. I guess I am too greedy (always expect it to go higher and higher)! With this play account, I want to sell a stock whenever I think the profit is good enough. So far the average holding time is about a week.
Money in the account were from signup bonuses I got from Zecco for referring new customers to them. I have published the Google spreadsheet that I use to track my trades and performance. The goal of this play account is to make money, small money, and I want to see how much I will have at the end of this year.
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