Remember about six weeks ago when I bought Sino-Forest? I bought 900 shares at $5.77, since it had fallen from around $15.00. After all, how much further could it fall? For a couple days, I felt like a genius as the share price rose to $7.99. But it was pure speculation and the share price soon fell to $2.50. It remained under $5.00 for quite a while.
Well, it’s finally come back over $7.50. I’m not waiting around this time. I know that the price could continue to go higher. But I’ve decided that I don’t care. The trade was pure speculation and I’ve made money on it. I’m not going to hang on for the last possible penny of profit. I’m cashing in now, with no plans to ever look at the share price again. I don’t want to know what might have been, so to speak. I don’t even really want to speculate on it again.
I’ve found that when I’ve sustained losses in the past, it was usually when I departed from my investment strategy. I don’t mind committing a little bit of money to something different, just to try something new and to learn from it. But I don’t have any desire to put my capital at risk by frequently changing my investment strategy. In this case, I had about $6,000 cash that wasn’t otherwise committed and I made about $1500 on it over two months. But I don’t wish in any way that I had put more of my money into the venture, even though it was profitable.
For the majority of my investments, I continue to invest for current income. In my own RRSP, which I don’t want to take withdrawals from, for tax reasons, I am using a type of momentum that has been referred to as “asset rotation”, to earn some capital gains based on supply and demand. Right now, I own gold, and it has served me well. It’s not necessary to use only a single investment strategy, but rather to know which strategy fits which purpose and what the possible risks are, in each case. Sino-Forest didn’t fit either of those strategies.
Update: Billionaire investor Richard Chandler announced that he raised his holding in Sino-Forest to 15% of outstanding shares at an average price of $7.36. Am I an idiot, acting in opposition to such a successful investor?