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Investment Selection and Management Disciplines, Rules, and Procedures

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The Problem

  • Investment selection and timing, regardless of the sources, generally include the investing control variables of the initial which, how much, and when of individual bonds and equities, mutual funds, index funds, money managers, and user defined investments; after which most investment advising and investment management stops and being generally adrift begins.

  • The performance problems with this one dimensional approach to selecting investments are:
    • Little or no consideration is given to the ongoing, dynamic process of investment management.
    • Performance depends very heavily on having to be right when selecting investments because there is no game plane in place to meet the challenges of change: of being both right and wrong in the financial markets.
    • It often attracts portfolio creation strategies that are profoundly flawed, fictitious, treacherous, and, on occasion, even predatory; therefore, destined to disappoint.

  • The results are usually an accumulation of unorganized and ungoverned investments that might be loosely defined as an investment portfolio resulting in most investment portfolios and monthly statements looking much like the "Winchester Mystery House" without consistency, discipline, direction, continuity, control, or theme.

  • The dimension of time, events, random trades, the moment, impulse, whim, fear, self-serving agendas, and 'seat of the pants' tend to be the predominant investment management variables governing change; out of control with investment performance ranging from disastrous to below average most of the time.

Investment Selection and Management

Investment selection and management generally includes the guidelines for investment selection and the investment control variables of the ongoing policies, procedures, and disciplines that dictate the selection and replacement of underlying individual investments in each of the investment sectors in an investment portfolio.

A few very basic examples include:

  • Bonds: A Simple Plan*

  • Utilities: Utility Dividend Theory*

  • Large Cap. Equities: Down Dividend Theory

  • Large Cap. Equities: Bad News Bears*
  • Equity Speculation: Stop and Go Pyramid*

Each investment selection and management strategy goes beyond just selecting an investment for whatever the reason and from whatever the source; each having very specific disciplines, rules, and procedures that govern investment selection, timing, management, and change.

For example, the simple and time tested Dow Dividend Theory; buy the ten highest yielding DJIA stocks that comprise the Dow and replace when a higher yielding Dow Stock comes along — investment selection, timing, and management are done for you.

*These and more included in The almost Perfect Investor /The almost Perfect Stockbroker.