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Good morning Michael,
Thanks for your willingness to actually read my response. You are one of my teachers and partly responsible for my success as an investor. Many years ago, I read “Trend Following,” which was recommended to me by Ed Seykota. Much later I bought Trend Commandments.
The hold back from greatness now is the fear of a partial “Blowup” at my age. World affairs seem so chaotic that I fear waking up to the first trades of the day showing the Dow off 20% and the Nasdaq even worse. I sidestepped all the big ones, Oct. 1987, 2000-2003 Dot Bomb, 2020 Covid decline and the 2007 financial crisis.
Reducing or exiting equities completely was more of a reaction to losing my own money than pure trend following. My growth efforts now are a combination of William O’Neil’s CANSLIM and your trend following principles. Trend Commandments reestablishes confidence in the superiority of trend following. I tried using Optimal F, but didn’t stay long. It felt like I was plunging more than investing. But, I loved the math.
I’ve read and studied dozens of books from, “Where Are The Customer’s Yachts”, “Extraordinary Popular Delusions and the Madness of Crowds”, to your two informative books. As well as many other investment books on Risk, Black Swans, etc. When I met Ed, he breathed life into the concept of trend following. Prior to Ed, I’d heard of trend following, but thought it sounded too simple and poo-pooed the idea. I didn’t really know what trend following meant at that time.
I live in [location]. I met Ed at [location]. When Ed introduced himself, I said, “You’ve got to be kidding, I just finished reading a book about you last night.” That was the start of our friendship. At that time, our interest was about how aircraft actually manage to fly. We did all sorts of experiments to show that the Bernoulli Principle was nowhere to be found on an airplane wing. That’s another story for another time, but only if you ask. Ed was reluctant to share all of his methods out of fear that I would not fully understand and might misinterpret his words and make costly mistakes. When I would ask him something directly, he would offer his experience.
Back to your question about what’s holding me back:
I’m currently rereading your book, “Trend Commandments” for the 3rd time. I needed the refresher because recently, I wandered off into an investment style that I’m not very good at – “dividend investing”. Because of age and other considerations, I moved about half my portfolios out of trend following (growth) to dividend investing. So far, so good. As money flows out of tech, it goes into the world-dominator – dividend stocks for safety. But, I’m not comfortable or able to sit on my hands while one or more of my dividend stocks starts to crater. I never get the long-term benefit ala Buffett.
Rereading Trend Commandments brought renewed confidence in trend following that I lived by for the past few decades.
Because of my age and the age of my friends and family whose accounts I manage, I rarely have more than 40% to 50% invested in equities. And still, I’m able to nearly match and often exceed the returns of the S&P500. Less risk, same result as a passive index ETF. Plus, it’s fun.So, in a nutshell, I’ve been a trend follower investor for more than 25 years but have never achieved the kind of success that you wizards have. My background is that I was born & raised in a relatively sub-middle income home, joined the USAF in 1964 and retired after 22 years – so no real investment or business experience. I received a scholarship from the Air Force and graduated with an Electrical Engineering degree from the University of [location]. A few years later, a Masters in Business and that’s when I realized there was this stuff called money that seemed more profitable than electronics.
Thank you very much for your clear, hard hitting message in Trend Commandments. I’ll reread your Trend Following book soon. I tried to use the Turtle Traders techniques that I found online, but didn’t find it compatible with my personality. Probably due to the big drawdowns.
Comments welcomed,
Best Regards,
[name]
Thanks a million for the thoughtful feedback!
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