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Island Investing

Riffs, rants, and the upside of investing from way off Wall Street


Why We’re Buying In This Market: Part Eleven

From the June 2010 letter to Tarpon Folio investors. The rest of this series can be found here.

In Case It’s All Making You Nuts

So what can you do to ease the stress of investing in such a volatile market?

I’ve got five suggestions.

1 – Just know that I’m on it. All day, every day. Should I see any data come out over the coming weeks and months that gets me truly alarmed about the future of our companies, the stock market, or the country, I will not hesitate to move some or all of the portfolio to cash. But this is not one of those times.

2 – Prepare yourself for media reports that will harp on whatever sells the most ads. In a weak recovery like this one, economic headlines won’t be sunshine and puppy dogs every time – particularly when it comes to unemployment. Correspondingly…

3 – Don’t get too carried away when things do turn positive, either. The biggest mistake you can make as an investor is to buy crappy companies near market peaks. Be cool.

4 – Consider making investments at regular intervals, rather than all at once. Among Tarpon investors with the highest returns to date are several people who contribute money regularly to their accounts every month. It’s easy to set up, takes emotion out of the equation, and in times like these, will allow you to improve your long-term returns.

5 – If you’re investing over a short time horizon that I don’t already know about it, or if you may need money earlier than you might think, call or email me. The sooner you need to withdraw any money, the more stress market volatility will cause – whether you’re invested in Tarpon or elsewhere. If I’m aware of any deadlines ahead of time, though, then we can take advantage of any big market upswings, or perhaps park some money in the lower-return but less-volatile Gecko Folio. Whatever works best. The point is just to make sure we’re on the same page when we each say “long-term.”

Please let me know if you have any questions. And thanks as usual for investing with us.

– Cale