How Many Strategies?
Sep 30, 2010

How Many Strategies?

There was a recent discussion concerning whether it's best for a trader to concentrate all efforts on a single strategy - in an effort to become an expert trader using that method - or expand one's knowledge, allowing for versatility.

It's a difficult question.  There is no doubt that the expert can expect to perform better for longs stretches.  However, no single strategy works forever.  It also runs into seasons when it is ineffective.  It's important to have other bows in the quiver.

A similar decision applies to investment clubs.  For example, when selecting stocks, is it best to assign members, on a rotating basis to do some research in an effort to find a recommendation as the clubs next investment?

Or would it be better to try to develop some expertise in the club and assign a specific industry to each of several members.  That way each member can make a timely report, only when one is necessary.

How is this for an idea for your club:  Have a small committee constantly working on each current position, looking for clues that it is no longer worthy of remaining in your club's portfolio.  Perhaps there's a warning of slowing growth.  Perhaps the P/E has moved too high, and there's risk of a price reversal.  I'm not telling you to time the markets, but selling a holding when it no longer appropriate to hold is just smart investing..

Your club:  Everyone's an expert in a specific area, or do you all play equal and diversified roles?
Mark D Wolfinger