Defining TBE
TBE is an attempt to get a good result by trying numerous means until the correct means is found. Errors are attempts that fail. They are costly and can be catastrophic. So many decisions are made assuming the only way to solve a problem or achieve success is by trial and error. The errors are discarded until the right way is found. However, this is a painful and slow and costly way to make many decisions.
Learn From Others
One of the reasons I decided to purchase a life-time subscription to the AAII (American Association of Individual Investors) is that I believe in education. I want to reduce the number of mistakes that I make by trial and error approaches to all aspects of life. I read the scriptures because I don’t want to make stupid, horrendous life and eternity decisions. I read about investing because I don’t want to destroy the engine that is providing for my retirement and for the future of my family.
Guidelines for Adding and Removing Stocks
Charles Rotblut, the AAII Journal Editor, wrote an article called “Guidelines for Adding and Removing Stocks, Part 1.” It is really a lead in to sell me more services they call “The AAII Way.” I’m not likely to buy the additional services, as I don’t need the help they will provide. However, the concepts in the advertising article are worth understanding.
Mr. Rotlbut says, “…there are broad characteristics of successful stock investing strategies for all types of investors—from the short-term chartists to those who seek to minimize turnover as much as possible.” He then goes on to share the key elements which are as follows:
• Understanding why you bought a stock and what changes would cause you to sell it.
• A systematic and repeatable process for deciding what to buy and sell.
• Simple enough for you to fully understand and routinely follow.
• Cost effective.
• Reflective of your investing time horizon, allocation needs, desired turnover levels and tolerance for risk.
• Require only as much time as you are reasonably able and willing to devote.
• Written or typed rules that are easily accessible when you need to make a decision.
My Written Investment Plan
It is easy for me to pick investments to buy and to know when to sell them. Emotion has little to do with the process. I don’t have to do a lot of guessing. I don’t need to follow the advice of a broker. Rather, I read books like The Little Book of Common Sense Investing by John Bogle, and added to my knowledge of the stupid things others have tried. I don’t have to repeat those mistakes. Therefore, my best advice for you, my reader, is read. Read the scriptures, as they are foundational for good decision making. Then read from other good sources to improve your mind and to eliminate, as much as possible TBE.
Know Your Flocks & Herds 