Buzzoo

Well, it’s that time of the year again. The holiday is winding down, and the new year is just out of the corner. Your waistline has again enlarged, andyou just pondered, “how could I ate that much these past days… I must shed afew pounds next year, it’s in my resolution.”But then you’d realized that “loosing weight” was in your resolution last year, and you are “by no scale” lighter than before. You’d then remember other things in your resolution list, and realized how you’ve failed in most of them. Then you thought, how could I failed so miserably with my resolutions?

I am about to write my own new year resolution. And as I was in a great relaxing vacation in Tahoe, I put some thoughts about these whole resolution writing business. I have a few ideas about it, hopefully they will help you and me write good resolutions for next year.

1. Resolutions should stretch you out
Before we write a good resolution, we must first consider what makes a resolution good or bad. Resolutions are lists of goals to achieve. Good goals should be larger than what you are capable of doing right now. It should take non-trivial effort to achieve them. If the resolution needs no effort to accomplish, then there is no need for the resolution.

2. Resolutions should be achievable
A good resolution should encourage you to accomplish what’s in it. So, although it should be a stretch, it shouldn’t be too far of a fetch. It should require determination, but it should be achievable. I have a friend who write “financial independence” in his resolution year after year. While I know that such a goal is a noble one, and one that I believe he will eventually achieve, it is something to big to achieve in one year.

There are two problems with too much of too lofty goals. The first one is that the feeling of failure when they are not met. The second problem, which is more dangerous, is that once you are acustomed with the failures year after year, you may become complacent and stop chasing those goals all together.

3. Resolutions should be quantifiable
A better way to achieve those lofty goals is by breaking them down to steps, and then try to achieve those steps troughout the years. For example, rather than writing “Financial Independence,” a better goal could be “Increasing my net worth by x %.” The second goal is more reasonable and quantifiable.

Achievements against quantifiable goals can be measured, and then the goals can be adjusted later. Let say that you want to loose weight next year. If you merely write “Loosing weight” for your goal, it wouldn’t be easy to measure if you’ve accomplish anything or not. Instead, write something like “Loosing 15 pounds” you’d know if you are short or if you’ve done well.

4. It shouldn’t be compulsive
Writing a good resolution shouldn’t be done in 5 or 10 minutes. Minutes are just not enough to contemplate what really you want to accomplish and how much you want to accomplish. I know that I am going to take no more than a few minutes to “write it down,” but as I said earlier, I’ve been contemplating about it since my recent vacation in Tahoe. In fact I am still thinking about it.

If making your resolutions means little to you, then probably your resolutions means less too for you. That’s why you don’t accomplish them. But it may be okay since you don’t really care… If you really do care about it, don’t be compulsive in writing one. Put some thoughts about it.

5. It shouldn’t be too long
Are you the kind who puts 15 to 20 items in your yearly resolutions? Do you remember what they were from last year? Long resolutions are often forgotten. And if they are forgotten, there is little value in it. Ideally, you have 3 or more goals for next year, but probably no more than 5. Remember, these goals should take some efforts to accomplish. Therefore, having15 or 20 goals that are lofty would just be unreasonable.

So those are some of my vacations thoughts. I hope you all have an exciting new year.

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Jim Cramer is quite a character. To me he is a tad too loud. But I guess his character brings life to his Mad Money show. Cramer does come with a wealth of knowledge from his many years as hedge fund manager.

He has some noticeable failure rate, though. Some people, in turn, actually invest by doing exactly the opposite of what he says.

I do not usually watch his show, I only watch it as I land on his show when I flip through the channels on a rare free time. However, I was not able to sleep a few nights ago. He was on TV, and he covered something that to me was very valuable. I’d go so far to writing them down

How to Invest like a Pro.

1. Never be fully invested, always keep some cash on the side. If you have 5% of cash or less, consider yourself fully invested. You need to have 10%, Cramer said. Only invest this money when the market is down significantly, 10% or more.

I would absolutely concur about this. A few days ago, Dow hits it’s all time high, as we enter an upbeat earning season. I was quite bullish, and I invested all I have. As for today, Dow was 600+ points off of it’s highs. Had I kept some cash on the side, I could have gotten some stocks in a much cheaper prices.

2. Always think of the potential downside. Whenever someone picks a stock, he/she always thinks of the potential upside. However, very few are thinking about the potential downside. This is particullarly true for a very volatile stock.

I am an amateur. . Mea Culpa

3. A man has got to know his own limitation. Only invest on companies that you know really well, in an industry that you are familiar with.

On this one, I think I am doing quite good. I don’t invest in many stocks. I invest in a few that I really really really know.

4. Worry if you make too much money too quickly. According to him, this is a sign that your portfolio risk characteristic is not balanced. A special care needs to be taken so that this gain is not lost, and further losses can be avoided.

I think this is a valid suggestion. It’s not that you don’t welcome the unexpected gain, but you need to be able to explain it. If it is unexplainable, then it’s probably time for profit taking, because the price increase is not supported. Take the gain before it’s all gone.
5. Never ever buy or sell stocks on an earning season. It’s simply just too difficult, it’s just like gambling. Wait until the earing has passed, and then jump in on the good news. Hold until the next quarters. A good quarter is an indication of more good quarters.

Well, I am (almost) fully invested now because of the earning season. Fortunately tonight aapl earning was really really good (up 67% than last year!!!!). But I’d agree with him that I have seen good stocks, including appl, that tanks after a good earning report.

Alright guys, happy investing like a pro.

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