Michael Cintolo of the top performing Cabot Market Letter recently reviewed three key lessons he’s learned or relearned in 2012.
Cintolo says that one of those key lessons involves relying on your investment system when times get stressful. While it is good to have a plan for different scenarios, he says, “obsessing over every scenario is stressful and often counterproductive. We used to have a saying in the office: ‘When you’re confused, turn it over to the rules.’ After all, if you have a system, it’s there for a reason — to rely on it! And by doing so, not only are your decisions usually better, they’re easier to make.”
Cintolo also says that 2012 was a good example of why you shouldn’t get caught in the middle when there’s no strong trend in the market. “Think of it this way — we’ve seen stocks do well, but generally in a three-steps-forward, two-steps-back manner,” he says . “Thus, you want to either sit through all five steps to develop bigger gains, or at least take some off the table after the first couple of steps on the way up.” He adds that until a stronger market trend develops (which he is optimistic could happen in 2013), it’s “probably best to incorporate some partial selling strategies on the way up — say, booking one-third or one-half after you’re up 10% or 15% — or, conversely, practicing patience with winners during a market correction, allowing a few to rebuild bases.”