by P. Bobby

Created on: April 08, 2009

A Hitchhiker's Guide to the Stock-market: When to Buy and Sell Shares'

It is hard to imagine any area in life where a profession's conventional wisdom is as bad as in investing. It makes me angry.

"Buy low and sell high" they cry, as if relaying some paradoxical investing axiom. "Thanks", I think to myself. Did I actually pay for that advice? What of "the trend is your friend". "Great", I reassure myself - "the trend was my friend until about midway 2008 when it suddenly wasn't." "Cut your losses and let the profits run", is another of my favourites. "Well yes, that sounds logical enough", I guess.

But how esoteric when do I cut and for how long do I run? Investment advisers not only have another language jargon they use to distance themselves from you and I they are from another planet; one where the obvious is stated, the logic obtuse, and/or the simple made complex. And to really mix things up, if investors are from Venus, Traders are from Mars.

What then of earthlings? Remember "Dent Arthur Philip Dent". How does an inhabitant of the earth, make investment decisions? More specifically, when should you or I buy or sell our shares?

But I am no expert or guru, nor sage. I know not of stop-losses', nor of Price to Earnings' or Debt/Equity' ratios. All important concepts, mind you, but not critical in my decision on when to buy or sell. And the answer can not always be 42 (for those of you who are interested, the answer is more likely to be found in the Mandelbrot (self-replicating) Series depicted nicely as fractals).

I have no guide to this strange galaxy. Rather then, I base my decision on the crowd the herd mentality - in this way:

When the herd mentality is overly pessimistic, the news all bad (when there is the proverbial blood on the streets') my contrarian instinct tells me it is time to buy I do not wait for others to tell me, like I said, it's instinctive.

But, by the time the magazines all have BOOM written on their front covers, the television and radio are chock-full of adds by investment companies vying for your money, by the time there is widespread investor euphoria and all your friends have a margin-loan, and by the time the party feels like it will never end and taxi-drivers are giving you their latest hot-stock tip; then my friends, that is the time when the share-market is at a precipice.

That is the time to sell your shares quickly; and pick up the Hitchhikers Guide (to the Galaxy), a cool soda - "ahh" - and relax.

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