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No. of Recommendations: 66
I must say, I'm amazed at the dearth of criticism in the messages responding to Rensor1 and his good fortune to date. It's not my desire to tell anyone how to invest their money..that is entirely their choice. But to think that Rensor's results are due to anything but exceptional good luck in the short term, is dangerous folly.

I cringed when I read his background information (age, job status, financial goals, investment experience, learning curve) and applied those few facts to his current situation. To take many years of hard earned retirement money out of a completely diversified vehicle (S&P 500 Fund) and plunk it lump sum into a single sector (technology) group of only 3 to 5 individual stocks, is the proverbial "asking for it" scenario. I know, I know you say but he turned $272,000 into a million in only 1 year. That feat has been accomplished even quicker in Las Vegas with much less up front capital but none of us would think that's the quickest way to a million would we? I call it exceptional luck because history shows that in any given 1 year period, you have only a 50/50 chance of making money in the stock market. We here in the Workshop and MI like to move those odds more in our favor by using "backtested" strategies that have done well historically (by the way, RS-IBD has not been backtested to the best of my knowledge). Nevertheless, even with the best research, knowledge, study and skill to expect triple digit CAGR's in our investments for any significant period of time is a pipe dream.

Real wealth is achieved and maintained by studying and investing in a group of DIVERSIFIED, profitable and well managed companies whether you find them in a mechanical strategy or through due diligence and painstaking research. We shouldn't let the recent incredible and unsustainable growth rate of the stock market completely erase the fundamental laws of the investing universe. We should instead enjoy this roaring and sustained bull market for what it is...a chance to accumulate assets when conditions are ripe so that we can ride out the inevitable downturns and really rough times. Reasonable diversification is a cornerstone of ANY successful investment plan that has stood the test of time. It will most likely help KEEP you a millionaire once you've had the discipline and good fortune to be one in the first place. Just my opinion for what it's worth.
MK3160
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No. of Recommendations: 0
I stumbled along the Millionaire Club post, too, since it was on "Most Recommended" list and I have to say I agree with you. One part of me says "damn, wish I would've had the guts to do that" and part of me cringes just as you described.

I invest in Jon Markman's FOG screen, a variation of RS strategies, so I'm familiar with the eye popping returns this kind of strategy can produce. I started it as 15% of my port, with the rest in other LTBH type stocks and and index fund. FOG is up 100%+ in three months. It's been fantastic, but I couldn't imagine sinking all of my retirement wealth into one "chase the high fliers" strategy.

Really, this bull market and seemingly non-stop P/E expansion can't go on forever. Especially if the Fed is serious about slowing down the economy. If and when this does end it will be the RS stocks that get hurt the most, IMHO. Rensor1 rolled the dice and came up sevens, but could have easily gone the other way.

The more I see these "I gained 500% last year" posts like this the more I think this really is a bubble waiting to burst as the Bears that lurk these boards think. It scares me, frankly, as it simply can't be sustained.

Ed
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No. of Recommendations: 5
I must say, I'm amazed at the dearth of criticism in the messages responding to Rensor1 and his good fortune to date. It's not my desire to tell anyone how to invest their money..that is entirely their choice. But to think that Rensor's results are due to anything but exceptional good luck in the short term, is dangerous folly.

I don't think anyone got the idea of going out and trying to duplicate his feat, and I'm sure we all figured out that it was "exceptional good luck in the short term." I don't see any reason why we can't enjoy his "exceptional good luck" with him instead of criticizing how he did it.

I'm pretty sure it's a good feeling to have $1million in one's portfolio (I wouldn't know, though -- yet<G>). I don't think he was doing anything more than kvelling his good fortune and sharing the joy.

More power to him.

Sharyn
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No. of Recommendations: 0
question? what to do when this finally ends - i have about 20% in rs-26 and enuf mm to last me five years - what to do when it finally cracks? i always assumed that i would just hold everything for up to five years and wait for the market to come back - that's what i did in '87. have been using the rs-26 for about 6 months and the returns are much better than the foolish four that got me into GT -60% S-30% MO-50% EK-30% and IP-20% i joke that the companies no one has ever heard of are eating my lunch SEARS while companies that everyone knows JDSU are making money. what did slick willie say? something about everything that's supposed to be up is down and everything that is supposed to be down is up :-)
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No. of Recommendations: 1
question? what to do when this finally ends - i have about 20% in rs-26 and enuf mm to last me five years - what to do when it finally cracks?

If you click on the current Workshop Report you will see my opinion for what its worth to your question.

I would add what makes you think its going to end with a downward explosion. It could be it might not. It could end with a correction to which I wrote why I'd stay the course.

IMO unless something drastically changes economically there won't be a change for awhile (I mean from the last 15 year trend not the last two year explosion). But who knows do you see the end of new companies with new thechnologies that will be hiting the market and our screens? Do you see the end of the growth to the current technologies that are on the market?

I don't but to the last question that doesn't mean some of them aren't over valued (like VISX's Laser stuff) last year. So a correction coming soon. May or may not. But us going into a long term Bear I don't worry about it. However the above doesn't mean that you shouldn't put money away for a rainy day.

Moe

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No. of Recommendations: 2
Real wealth is achieved and maintained by studying and investing in a group of DIVERSIFIED, profitable and well managed companies whether you find them in a mechanical strategy or through due diligence and painstaking research.

Theres many views on this but lets take it from an actual market wizard (truly). William O'niel interviewed among other successful giants of the market in the book "Market Wizards" that so many on this and the MI board have alluded to, and publisher of Investors Business Daily newspaper and author of "How to Make Money In Stocks":

"An individual investor with even a large portfolio of a million dollars need not own more than six or seven well selected securities. Broad diversification is a hedge for lack of knowledge, or ignorance.

Most people with $20,000 to $100,000 to invest should limit themselves to four or five carefully chosen stocks. Once you own five stocks and a temting situation comes along that you want to buy, you should muster up the discipline to sell off your least attractive investment. If you have a total of $5,000 to $20,000 to invest, three stocks might be a reasonable maximum. A $3,000 account could be confined to two equities. - William O'neil, How to Make MOney In Stocks, Pg 110.

Even though in his book listed above he states that his methods are not momentum investing, IMO it is as close as you will come to it. So is the MI way of investing which is Relative Strength (RS) and secondly Value Line. The essence of his ways and our MI ways are the same with of course some variations.

Learn from the people who have succeeded in the past. How did he do it? One of his tenets is listed above.

So his knowledge on lack of diversification as a good thing applys to us as well. Even in at the million mark.

John.
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No. of Recommendations: 0
Most people with $20,000 to $100,000 to invest should limit themselves to four or five carefully chosen stocks. Once you own five stocks and a temting situation comes along that you want to buy, you should muster up the discipline to sell off your least attractive investment. If you have a total of $5,000 to $20,000 to invest, three stocks might be a reasonable maximum. A $3,000 account could be confined to two equities. - William O'neil, How to Make MOney In Stocks, Pg 110.

While I support the millionaire this generic advice is awful. I'd sure like to know one bad mistake could cost me 20 to 25% of my portfolio. However, even if you think this is good advice, I would guees that if you asked William O'neil weather this applied to 5 stocks being bought blindly because they were on a stock screen that even he wouldn't agree with this advice.

Moe
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No. of Recommendations: 3
Most people with $20,000 to $100,000 to invest should limit themselves to four or five carefully chosen stocks. Once you own five stocks and a temting situation comes along that you want to buy, you should muster up the discipline to sell off your least attractive investment. If you have a total of $5,000 to $20,000 to invest, three stocks might be a reasonable maximum. A $3,000 account could be confined to two equities. - William O'neil, How to Make MOney In Stocks, Pg 110.
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While I support the millionaire this generic advice is awful. I'd sure like to know one bad mistake could cost me 20 to 25% of my portfolio. However, even if you think this is good advice, I would guees that if you asked William O'neil weather this applied to 5 stocks being bought blindly because they were on a stock screen that even he wouldn't agree with this advice.


I agree with Moe. O'Neil's advice is similar to what has been written about Warren Buffett's investing style. Buffett says that diversification is for bad investors; people who buy stocks without knowing what they are buying. Buffett claims that he invests only when he is confident in his investment, and therefore he doesn't need to diversify. IMHO, Buffett and perhaps O'Neil are the exception, not the rule. Most of us would not be able to pick three or five stocks with high confidence. We, the unwashed masses, need to diversify to protect ourselves from our own mistakes. To think otherwise would be extremely arrogant and not very smart.

When we use workshop screens we know for a fact that they are not carefully selected stocks. We can see how, historically, almost every screen in every period has selected some winners and some losers. That's why we need to diversify. We shoot for the long term average performance of the screens, which is good enough. To get that, we must diversify enough so that we don't move away from the screens' performance due to random chance.

Elan
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No. of Recommendations: 2
<<Even though in his book listed above he states that his methods are not momentum investing, IMO it is as close as you will come to it...
Learn from the people who have succeeded in the past. How did he do it? One of his tenets is listed above.>>

John,

You say we should listen to O'Neil's advice against diversifying, but ignore what he says about his methods not being momentum investing.
If you listen to those who have succeeded only when it suits you and not when it doesn't, is that really learning?

Greta
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No. of Recommendations: 0
You say we should listen to O'Neil's advice against diversifying, but ignore what he says about his methods not being momentum investing.
If you listen to those who have succeeded only when it suits you and not when it doesn't, is that really learning?


I don't know about you, but I don't believe everything I read. 8^)
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No. of Recommendations: 1
If you listen to those who have succeeded only when it suits you and not when it doesn't, is that really learning?

Greta


Greta,

I listen to sound principles of investing of O'Neil. I do not listen to protestations of what his methods are not without sound reason from him.

John
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No. of Recommendations: 3
"We, the unwashed masses, need to diversify to protect ourselves from our own mistakes."
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IMHO, the leaders and big hitters on this board, including yourself, are the most "washed" investors I have ever seen. Brilliant beyond belief and exceedingly dangerous assembled together as they are here.

"When we use workshop screens we know for a fact that they are not carefully selected stocks."
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As far as I'm concerned you could study a stock's fundamentals from here to kingdom come and still not accurately foresee how it will turn out. On the contrary, I see all stock selection as flawed when compared to a reliable crystal ball and feel that our screens or port strategies are the very best way of picking stocks currently available. Any stock that does'nt work out was still an excellant choice at the time of the original decision.

(Of course, to revert to the vernacular, and in remembrance of Will Rogers's famous saying, my convoluted and occult advice to would-be investors is this: "If it don't go up don't buy it.")

Seriously though, I'm a big believer in blends and therefore diversification, but I also believe that our (screen) stocks *are* very carefully selected stocks. They are because we have given great thought to deciding on the criteria by which they are chosen. In addition to being carefully chosen, they have the extra advantage (once we decide on the strategy to be used) of being chosen objectively.
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No. of Recommendations: 0
While I support the millionaire this generic advice is awful. I'd sure like to know one bad mistake could cost me 20 to 25% of my portfolio. However, even if you think this is good advice, I would guees that if you asked William O'neil weather this applied to 5 stocks being bought blindly because they were on a stock screen that even he wouldn't agree with this advice.

Another part of O'Neil's rules is that you must sell any stock if it drops 8% from your purchase price. No exceptions, no questions, no thinking tomorrow it will start its way back up. That's his way of hedging against the 20 to 25% loss for one bad pick.

For what it's worth, I don't use his stock picking strategies, but I read IBD a lot to keep informed about companies.

Mike
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