Successful Investing Avoiding Implementation Shortfalls ( Mutual Funds )..An issue every investor faces is that of successfully
implementing his investment strategy.



Its nice to read or hear about great investing strategies but
oftentimeswhen you try to implement themthey fail to deliver
thesuperior returns.



Here are some key points to consider to maximize your chance of
success when you implement your strategy.

Transaction Costs

Advertised performances seldom take into account trading costs.
One reason is that costs will be very different depending on
which stock broker you use.



Ensure your Trading Cost is kept under 1%. Reciprocallyalways
remove a good 1% for transaction costs from any performance
numbers you see.

BidAsk spread

This is a hidden fee and can be a Killer. It is too easy not to
pay attention to: for instanceBidAsk spread is not included
in Mutual Funds Expense Ratios. Very few studies or
performances from investment books take it into account.



BidAsk spread is larger for small Cap (sometimes in excess of
1%) than for large Cap (usually less than 0.25%).



Turnover rate is also very important.



Value Investing with lower turnover rate and larger market
capitalizations will suffer less than Momentum strategies that
typically invest in smaller cap and keep stocks for just months,
weeks or even days.



For instancea strategy investing in small cap with 1% average
BidAsk spread and an annual turnover rate of 300% will loose
1%Mutual Fund300%=3% per year. This is on top of trading costs !

Can you execute thetrades ?



Most investment strategies assume that you Buy and Sell Stocks
at specific time but can youin practicebuy or sell at that
specific time ?



How often have you seen Stock Picks recommendations often on
weekends but then on Monday it is impossible to execute at
theFridays price because theshare skyrocket 20% at the
opening.



Latertheguru proudly announces that his stock pick
outperformed but you could not buy at theset price so could not
reap theadvertised gain.



This can be an issue for strategies with frequent trades. Again,
Value Investing will suffer less because there are fewer trades
so it is less sensitive to exact entry/exit points. If you use
href=.....mechanicalinvesting.com/markettiming.html Mar
ket Timing favor systems with few signals per year.

Diversification

After a strategy is highlightedit is not rare to see it
underperforming. A good example is theDogs of theDow. The
strategy underperformed after it was detailed in theearly 90s.



Many attribute its underperformance to thefact that too much
money flowed into thestrategy thereby reducing its efficiency.
I rather attribute its underperformance to thebiggest Bull
Market in History where Value Investing was less rewarding than
Growth/Momentum.



A take is that every strategy will underperform at some point.
This is when your nerves will be at test and when you will be
tempted to abandon and switch strategy... only to see it
outperform afterwards.



thesimple solution highly recommended is to diversify with
2 or more investing strategies.



Since thentheDogs of theDow has been outperforming theDow
Jones and theS&P500 since 2000.

Conclusion for Successful Investing

Whatever your investment strategythere will be a difference
between paper profits and real profits. This is true even if you
invest in Index Funds.



To maximize your chance of success in theStock Market:

Strive to keep transaction costs below 1% per year

Pay great care to strategies investing in Smaller Cap with
high BidAsk spread

Beware strategies with frequent trades

Diversify

About theauthor:
Jacky Pandion is a DIY Investor. He advocates a disciplined way
to invest in thestock market. Visit
.....mechanicalinvesting.com www.mechanicalinvesting.com for href=.....mechanicalinvesting.com
target=_New Successful Stock Investing strategies .

((( top mutual funds )))
-geeI