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RealTraders !!!
I have been doing a lot of thinking concerning how to pick stocks for
the long haul in which to invest savings and, hopefully, speculative
profits.
Q: Do I run TradeStation ChartScanner on 5,000 stocks each night?
A: No. I would commit suicide. Besides, for long term investments you
need to understand and be confident in the company -- You need to follow
the fundamentals. Picking stocks on a technical search means that you
must constantly read up on the companies that you find. And a greener
pasture(stock) is always just a newspaper or TV show away. When does
the searching end and the confident long haul start?
Q: Do I subscribe to a Guru letter or system?
A: No I don't think so. There will always be another Guru that looks
greener.
Q: Do I put my money in an actively managed Mutual Fund?
A: Why? If in 1997 90%, yes 90% of active managers where outdone by the
S&P 500 Index?
Q: Do I then just use the Vanguard S&P 500 Index Fund?
A: The market as a whole will not always do 25%, and sometimes, in the
next 10 years it may not nearly do 25% as a whole. The S&P Index is too
broad. And as the type of person that subscribes to RealTraders, just
passively holding a S&P 500 Index Fund would bore me to death!
Q: So what is the answer?
A: The Morgan Stanley High Technology 35 Index(MSH) !
The MSH has 35 of the best technology stocks, logically picked to
represent the high tech "value chain" of industries. Companies such as
CSCO, IBM, MSFT, INTC, DELL, CPQ, TXN, MOT, and HWP. Also, consumer
related high tech companies such as AOL, ERTS, INTU. Service
outsourcers such as EDS, AUD, FDC, and CSC. Special industrial control
and sensor makers such as STM and LLTC. The MSH is a broad spectrum of
the cream of the crop of US high tech. An occasionally, when a stock
falters badly or falls behind, the Index is updated. So, your "stock
picking" is done for you, by thoughtful analysts at Morgan Stanley.
The MSH, an Index created in 1994 and that trades on the American Stock
Exchange, outperforms the S&P 500! I think that it stands to reason
that during the next 3 to 10 years, the trophy tech stocks in the MSH 35
will continue to outperform the generic market as a whole.
And it is only 35 stocks. One mind can follow and really get to know
these 35 stocks over the years (I think this is VERY important). The
Internet and technology has a long way to go with lots of new
generations of hardware and software. These are the cherry companies
that will capture many profits in the future and experience continued
growth, with new product after new product.
And now for the RealTraders show stopper: The whole dam portfolio can be
hedged in times of tech market peril with MSH Index Puts! (good
liquidity, too) So, as an investors mature and become more
sophisticated, they can limit or eliminate the damage down by
corrections. You can be "pro-active", and dare I say "empowered".
One last point on options: Besides the Index Options, the MSH 35 stocks
are among the most liquid equity options. So stock options could be
used to augment common holdings. And since you study these stocks, you
would be more likely to be successful and be able to augment major moves
with options.
And it can all be done in an IRA!
So, pre-ordained long term success, better than an S&P Index Fund,
because of the cherry high tech stocks, hedgable as a whole with minimum
transaction costs because of the perfect fit of your portfolio and the
Index, and interesting because of all the trading techniques that can be
used and the A to Z technology value chain that the MSH 35 represents.
COMMENTS PLEASE !!!!!!!
Thanks,
Tim Proeber
tproeber@xxxxxxxxxx
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