Education time - buy-cut-buy vs buy-and-hold strategy

by ckchoy
When stock prices are in uptrend, investors can make profit easily. One may set a target price using TA or FA. It is either making more or making less. For example, one might have taken profit at 10% - 20% gain but upon sold, seeing the share price kept rising and hit 100% gain, he may curse himself not able to ride the bigger gain. Whatever, the heart inside still smiling as he is still making profit, he will not have hard feeling on it.  Everyone can handle profit well.

How about losses?  A lot of investors and people cannot handle losses well including me. But small losses vs big losses do make a different. And many of us can have a control of our losses.
Let's look at these strategies
buy-cut-buy vs buy-and-hold

When market started to move weird, example, small drops bit by bit now and then.  These losses started to accumulate, this may give hints that market is in downtrend. And upon market started to have panic selling and in big plunge, then market may have chance to reach bottom.
As market is dynamic, past history only  good enough for reference, hence the so called percentage drop amount analysis and time period analysis to judge a bottom is not always accurate. For example is it a 40%, 50%, or 80% drop mark a bottom? A 10 years, 8 years or a 4 years mark a economy cycle? For the past economy ran itself going thru the peak, recession and recovered on its own. But nowadays there are interventions like fund injections, bailout and many more steps to shorten the recession but this will make the market reaching its peak fast and slump back to down again in shorter period.

Let's say stock abc dropped from 12 to 10 and an investor decided to buy in, but then stock abc continue sliding to 5  before it hit the rock bottom and climb back to 14.

For a buy-and-hold strategy the investors will going thru the cycle seeing his portfolio in 50% loss, (stock abc moved from 10 to 5) and he needs a 100% gain (stock abc to climb from 5 to 10) and then see a 40% gain finally from 10 to 14.

For a buy-cut-buy strategy, one can buy a stock and then set a stop loss let's say 2%, but must remember to buy back after cut. Usually when market started to move down fast substantially, it may take about 1 to 5 times before we catch in the right rock bottom price. And remember market will not move down in straight line to hit it's bottom, there will be rebounds in between, hence we may even make small profit even though we caught a wrong bottom by using buy-cut-buy strategy. So we can estimate we may need to endure only 6 to 8% loss before we catch the rock bottom price, compared to a 50% loss if using buy-and-hold strategy. And then when the stock price move up to 14, The buy-cut-buy strategy will make 180% gain vs 40% gain of buy-and-hold . The 6 to 8% loss incurred compared to 180% gain will be nothing.

What about if stock abc never recovers and trades around 5 for a very long time? Then for the buy-and-hold strategy can almost say the 50% loss is realized, but for the buy-cut-buy strategy, he only will lose about 6% to 8%

We can apply these strategy to blue chip stocks and non-blue chip stocks. Of course blue chip stocks tend to be lower risk and have higher chance to bounce back and hit even higher price. Non-blue chips on one hand can surge few folds but on the other hand it also can be a forgotten stock and still stagnant at a low price for a very long time.

It depends on your risk profile.

当股票价格上升趋势是，投资者可以赚钱容易。人们可以设定一个目标价格使用TA或FA。这是不是去制造更多或更少。例如，一个可能采取利润在10％ - 20％的涨幅，但根据出售，看到股价不断上升，达到100％的涨幅，他可能会骂自己不能骑更大收益。不管结果如何，心里面依然微笑，因为他仍然是赚钱，他不会对难的感觉。每个人都可以处理好利润。 怎么样的损失？一个投资者和很多人不能处理好包括我在内的损失。但小的损失比重大损失之间确有不同。而我们很多人可以有我们的损失控制。 让我们来看看这些战略 买停产的购买与买入并持有 当市场开始有点怪异举动，例如，有点小滴，然后现在。这些损失就开始积累，这可能会暗示市场跌势的。并开始对市场有出现恐慌性抛售，并在大暴跌，那么市场可能有机会达到底部。 由于市场是动态的，过去的历史中，只有很好的参考，因此所谓的百分比下降值分析和时间周期分析，以判断一个底部并不总是不够准确。例如是40％，50％，或80％下降标志着底部？一个10年，8年或四年标志着一个经济周期？在过去的经济运行本身通过的高峰期，经济衰退和自身的恢复。但现在也有像基金注资，救市，更多的步骤，以缩短衰退，但这种干预将使市场在较短的时期达到了顶峰快速下滑回下来了。 比方说，美国广播公司股价下跌至12至10及投资者决定购买，但后来美国广播公司股票继续下滑至5在要撞上岩石底部回升至14条。
  对于买入并持有策略的投资者将通过看到他的投资组合中50％的亏损周期中，（美国广播公司股票已从10日至5），他需要一个100％的涨幅（美国广播公司股票从5个上升到10）和然后看到一个40％的涨幅终于从10至14岁。
  对于购买切后买的策略，可以买入股票，然后设置一个止损比方说2％，但必须记得买后削减。通常，当市场开始快速大幅向下移动，可能需要1至5次，我们在正确的最低价赶上。并记住市场不会朝直线下降到打它的底部，会有个篮板之间，因此，我们甚至可能使小的利润，即使我们通过购买陷入停产的购买策略是错误的底部。因此，我们可以估算，我们可能需要忍受只有6至8％的损失，才赶压价，而50％的亏损，如果使用买入并持有策略。然后当股价上升到14，买停产的购买战略将作180％的涨幅比40％的购买和持有收益。 6至8％的损失承担180％的涨幅相比，将是什么。 那么如果股市复苏，美国广播公司从未在5行业在很长的时间？那么对于买入并持有策略几乎可以说是50％的亏损实现，但对于购买停产的购买策略，他不仅会损失约6％至8％
  我们可以将这些策略，以绩优股和非绩优股。当然，绩优股往往是低风险，具有较高的机会反弹，甚至达到更高的价格。一方面非蓝筹股会突然上升几个褶皱，但另一方面它也可以在一个被遗忘的股票价格低，仍然停滞了很长的时间。 这取决于你的风险状况。