Matthew Finston's  Instablog

Matthew Finston
Send Message
I approach investing as a social theorist and a cultural historian. As a result, I am a contrarian. Studying the history of financialization, I have to agree with value investors like Seth Klarman, George Soros, and John Quiggin that markets are ultimately inefficient. However, I am not an... More
  • Tips On How To Avoid Losing Your Entire Portfolio 2 comments
    Apr 6, 2014 4:06 PM

    I have written this on another forum but I think it is useful to put here.

    1) You don't need to own every marijuana stock. Sometimes I am only carrying one or two. Just because others are buying doesn't mean you should too.

    2) Be a contrarian. With certain stocks that have been ignored or 'oversold,' tend to have reversals. Ask yourself: Why did so many traders dump their shares? and Is there some underlying value that people have underestimated? This is not a hard a fast rule.

    3) Hold onto cash. I have been particularly inspired by Seth Klarman, a hedge fund manager, who holds nearly 50% of his portfolio in case but manages to have an annual return of 20% no matter what happens to the market (I know this sounds small in comparison to what MJ stocks do but you have to realize the guy is dealing with multi-billion dollar portfolios). Especially with so many new companies popping up it helps to have a little cash so you can take a new opportunity that you like. Holding cash also represents a 'margin of safety' just in case the market blows up in your face. I currently have 33% of my portfolio in cash (in part because my investments have done better than expected).

    4) Markets are reflexive, not efficient. This is an idea George Soros talks about (another hedge fund manager). Traders tend to create over or underestimate the market and create excellent buying/shorting opportunities for the contrarian investor. In a sense, if we believe a stock to be valuable, traders will overvalue them. Ideally share-price reflects expected future earnings and underlying equity.

    5) Be patient this is related to #1 but it also applies to your losers. Unless you need the cash it is never smart to panic and sell.

    6) Have an exit strategy. don't be married to your stocks. You are never going to sell when the stock hits its peak price because often times those are phantom prints.

    7) Don't follow the herd. Pick your own strategy and be happy with it. if you are buying a stock because a bunch of other people are buying then you will most likely start selling when everyone starts selling. Pay attention to indicators like RSI when stocks hit 70% overbought and 30-50% oversold areas. expect a reverse trend when the stock hits these areas.

    8) Never buy something because a bunch of people tell you to *sigh*

    9) diversify (I think 10-40% cash,if you must no more than 5-25% pot stocks (normally I would say no more than 10% but you are here so I say 25% is THE MAX), 20-35% mutual funds, 15-30% ETFs (I am not the biggest fan of ETFs however), 10-25% blue-chip.

    10) look for opportunities that others don't know about or have ignored

Back To Matthew Finston's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • StocksGrim
    , contributor
    Comments (8) | Send Message
    I'm sure my feelings will change over time but now I fully believe in investing 100% of portfolio in pot stocks and diversify in the sector...With DD I put larger sums of money in stocks I have confidence in at particular price points for Ex $ATTBF MINE etc but also start small speculative positions in pot stocks I hear on the rumor mills $FRTD HRDN lol in order to catch these 1000% runs that are occurring, well worth the risk if you know what your doing and can handle days of panic lol...So I agree with what you say in general but also think its extremely conservative advice which will work great for the conservative investor...But if your reading this and have confidence in what your doing "Let er Ripp" and invest a lot of money aggressively in the pot sector until it appears the bubble has popped


    Tha Grimm
    6 Apr 2014, 06:45 PM Reply Like
  • Matthew Finston
    , contributor
    Comments (969) | Send Message
    Author’s reply » But for those who don't know what they are doing, they actually end up being the bag holders of the more sophisticated investors who use manipulative tactics to pump up stocks and leave the party a little early.


    even if you 'think' you know what you are doing, you don't. no one does. That's why markets crash and people lose their life savings. some people are clever enough to avoid these crashes but even sophisticated traders can lose in the end. no one is invincible.
    6 Apr 2014, 07:05 PM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.