glad you clarified - a lot of people don't understand this point and is something i am dead-set against. fundamentals make a good stock, if you're holding long term then dlooar cost avg is GOOD. if you bought stock on a tip, are losing, and dollar cost avg it out because daddy does it, then you are a nutter and should try the casino instead.
my point in waiting. i haven't touched the market since my Centro short when it just dipped below $1. that to me was about the total end of rationality in the ASX - no way was centro worth $1 with it reportings. why did i pull out of the market? i knew the shorters would be licking their chops, i traded with them and left it at that. no point buying regardless of the reduced prices and PEs and increasing dividends if you'r going to get sold down by a massive conglomerate or hedge fund.i also got burned on centro. Centro was my 2007 BnB. After the plumpit i bought it at $1.70 and chickened out the next day at 80c after realising that alough the $1.70 was only 40% odd of the stated net assets, i couldnt be sure how realiable their stated net asset value was. In 2008 i made the same mistake with BnB and exited after realising quite a big loss.
it's too hard to pick a good short now on stock, indexes are a little easier at present. trying to stay in long term on a short position opens you up to paying dividends and being closed out for no reason.I am not sure how to respond to this. Except to say that its very hard to try and blend being a trader with being an investor. The whole pyscological mindframe is different. Its for this reason that i bar myself from trading. I dont want to be distracted. a lot of people think you can just chuck a dart at the finaincials sector and make money by shorting, but the trouble is when you're leveraged with a CFD it only needs to move 3%-4% against you and you're at your stop. considering Wachovia gapped up almost 50% the other day, you'd have owed your margin plus another 4x your margin - not fun. Once again this is viewing it more from a traders perspective. Generally i am quite wearing of banking stocks because they are so complicated that there needs to be someone with much higher IQ than i posess to value them. For Australian banks, i invest in them more because of their unique global positions than because i really understand them. Their unqiue positions means that they operate as a mild form of oligopoly. In addition i look at four other lesser macro factors with regards to investing in australian banks: One: they are a more 'bland' than their overseas counterparts (country bumkings?) and thus never got caught up in all the exotic derivative products to the same extent as their overseas counterparties. Two: the residential property mania pretty much leveled out in 2003 (im not saying the market platued here, just that the mania died down), thus debtors as a whole have had time to build equity in their properties. Three RBA interest rates are quite high by world standards. Thus there is some 'fat' in them that can be released if the going gets tough, and yet still have an macro interest rate that assists in containing inflation. Four: Unlike many developed countries, the federal government doesnt have existing material debt levels. Thus if the going gets tough they can run some deficits to boost the economy without effecting their debt ratings.
However having said all this my portolio at present is only around 16% banks against a market average weighting of around 20%.
In regards to indexes for the majority of investors under normal economic conditions this should be the way to invest. Over the long term you will probably beat the MAJORITY of active investors.
However i have a fealing that over the next 5 years, under this period of global instability, this market will be characterised as a stock pickers market rather than a uniform uplift in the market as a whole. One of the big headaches with debt inspired crashes is that they are not quick in restoring themselves. This problem is not going to go away quickly. Once again i refer to the Asian economic crisis for the most recent example.
