Ask Mike:
Can I cherry-pick your picks?

Question:

Ben, from Chicago asks:

Hi Mike,

I am a new subscriber and am just getting my feet wet with your service. Your focus is from a total portfolio perspective, which is fine for a lot of investors, I suppose, but I prefer to run with my own ideas about which stock to buy and when to sell. What kind of luck has your subscribers had with 'cherry-picking' your weekly stock picks?

I don't see why I couldn't do better just picking one or two of your picks from any of your portfolios each week. Do you think this strategy has merit or am I forced to do an all-or-nothing approach to your portfolios?

Thank you.

Ben

PS: Don't get me wrong. I am willing to follow one or more of your portfolios if that's what I have to do to make your returns. I am just curious about selectively picking from your picks.

Mike's Response:

Hi Ben,

Welcome aboard!

Certainly, there is nothing wrong with getting input from lots of sources, including mine, before making a final decision about buying or selling a stock. There are no 'must follow' rules about TurnerTrends.

But, regardless of how you go about picking the right stock at the right time and selling the right stock at the right time, you really should consider all of your holdings as a single portfolio.

It is important to have specific rules (your rules) for diversification, asset allocation, exit strategies, cash management, etc. when managing a portfolio of stocks with the goal in mind of consistent profits.

I tell folks that if they follow my picks, trade-for-trade (including cash management) then, on a portfolio-by-portfolio basis, they can match my returns.

I don't ascribe to buying a stock just because someone likes it or touts it. I don't even buy stocks even if I agree with all of the opinions and believe the stock is a likely strong winner. I only buy a stock if it fits in the portfolio from a diversification perspective and has the appropriate technical and fundamental buy signals. And, even then, I might not add the stock to the portfolio if I feel my cash position does not support more equities in the portfolio.

Here is what I mean... If I happen to believe the market is headed higher and that stocks are more in favor with investors than not, I might be 100% in equities and 0% in cash. If I believe the market is headed lower and perhaps significantly lower, I will move to a position of 80% or 90% in cash. I use the ratio of cash-to-equities in my portfolios as a reflection of my opinion of where the market is headed. The stronger the market the less cash. The weaker the market the more cash.

Once I have settled on the amount of cash I should have in the portfolio, I then know how much I can use for equity purchases. And, I have strict rules about how much cash can be spent on each equity.

I cover these and other rules in my '10 Must Follow Rules for Consistent Profits in the Stock Market' on my website. If you want to cherry-pick my picks, that is certainly up to you. However, I strongly recommend that you have predetermined rules in place for the management of your portfolio including cash.

Thanks for subscribing!

Regards,

Mike