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October 11, 2012


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Diversification is essential which is why I gave up buying individual stocks very early in my investing life. A managed mutual fund typically owns hundreds of companies and has a team of analysts that do all the research needed to zero in on the best companies to buy.

However, my investment success did not come from buying and holding an assortment of mutual funds representing a broad base of many of the available sectors.

Instead I used ranking software to purchase 4 or 5 funds that represented the sectors that were currently the best performers based upon several short term time periods. I would then follow those funds on a daily basis and when a fund violated the parameters of indicators that I was using, I would immediately sell it and do a search for a replacement. In my early days of investing I used the Fidlity Selects which is a 42 fund family where each fund holds a selection of companies in a particular sector. During the bubble it was even easier, I just chose 4 or 5 funds that were great performers and held emerging growth companies that were prospering in the emergence of the Internet. It was quite rare for me to hold a fund for as long as 6 months.

I also used to do a post-mortem on each trade that I made. It helped me later on to refine my ranking and fund selection techniques.

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