Politics and Investing

You may ask why politics is discussed in this investing book. Politics has been proven to affect the market. For example, the market had reacted to the different stages of Quantitative Easing whose dates had been preset. The following is a more recent example.

I predicted 2015 would be a year with small profit and insisted on so even during the fierce correction in August. Why I was so sure? Very seldom the market is down in a year before an election year including 2007. The last occurrence was 1939, the year when WW2 started. Investing is a multi-discipline venture including statistics and politics. It may not always happen, but the probability is high for these years.

How to profit

2015 was a sideward market. The market reacted to good news and bad news. The strategy for sideways market is: Buy at temporary downs and sell at temporary peaks. Define ‘temporary’ according to your risk tolerance.

For the ‘temporary market down’, personally I used 5% down from the last market peak. To me the ‘temporary market peak’ is 10% up from the last market down. The percentages can apply to the percentage changes in the stocks in your watch list. In another words, I buy the stock when the market is 5% down from the last peak and sell it when it gains 10% or the market gains 10%. Be reminded that this strategy is opposite to market plunges, where you should exit the market totally - again depending on your risk tolerance.

The following are my purchases on 08/26/2015. I should have bought more stocks and one day earlier if I were not blinded by fears (a human nature) during this correction. Here is my proof for my purchase orders as I was asked to. The four stocks were described as value stocks in a SA article and I did a simple evaluation.  As of 12/31/2015, I sold all the four stocks except Gilead Sciences.  The annualized returns are more impressive such as GNW’s 10% gain in one day.

Stocks	Buy Price	Buy Date	Return	Sold date
Apple (AAPL)	107.20	08/26/15	12%	10/19/15
Gilead Sciences (GILD)	105.94	08/26/15	-4%
General Motors (GM)	27.69	08/26/15	12%	09/17/15
Genwealth Financial (GNW)	4.54	08/26/15	10%	08/27/15

There were similar examples in 2013 and 2014.

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 The above is from my book "Complete the Art of Investing". Click here or search it from Amazon.com.