Month: December 2013

If you’ve ever watched a hockey game, you’ve probably seen team owners and managers high up in the stands stoically gazing down at the action.  Even though they’re watching the same game as many of the cheering fans, the team managers and owners’ view of the action is far different than that of the crowds below them. In the minds of owners and managers, wins and losses translate into real business revenue gains and losses and ultimately portfolio value being created or getting destroyed for someone.

While you don’t have to put on a power suit or practice an emotionless stare, getting into the shoes of a hockey team owner/manager can offer a great window into how to translate team performance into portfolio value. Thankfully, in today’s world there are a number of great fantasy hockey leagues (such as Yahoo or ESPN) that make it easy for users  to experience many of the same thrills and spills of managing a team for a whole season.  As with the finance world, there is no shortage of stats, analysis and commentary to wade through in order to make a decision.   Further, planning and executing trades can be as simple or complex as a league permits.

On the whole, the business of managing a hockey team offers a fun way to learn and apply some of the core principles of investing. This article looks at 3 ways that managing a fantasy hockey team can teach you to be a better investor (and also provide a great reason to spend so much time immersed in hockey for the season).

Lesson #1: Asset Allocation

When investing in the real world, the prevailing wisdom states that portfolios ought to have different asset classes (such as stocks, bonds and cash) portioned out accordingly.  As the owner of a fantasy hockey team, your players are your assets. Like a financial portfolio, a hockey team requires a mixture of players each playing a particular role.  While financial portfolios have more flexibility in the concentrations of assets, fantasy hockey teams require managing the right mix of players and positions and achieving the right mix of growth (with rookies), stability (veterans), offense (point production) and defense (preventing points against).

Lesson #2: Risk Management

Injuries, slumps, illnesses, personality clashes, dirty hits, run-ins with the law – there’s a long and unpredictable set of circumstances on and off the ice that can sideline a player. Just like investing in the stock market (or any other market), in fantasy hockey there is no such thing as a sure thing.  Chasing the high flying players (stocks) at the expense of having depth and stability on the bench (portfolio) means that one unfortunate incident can seriously impair the entire portfolio’s performance. In fantasy hockey, however, the losses are nowhere near as catastrophic as those in the real world.

Savvy investors understand that risks are ever present and so they also understand that in order to successfully invest, risks have to be minimized (where possible).  Equally savvy fantasy hockey team owners know that having several players who are strong in a particular category (such as faceoffs or goal scoring) helps to underwrite the risk of one really great player in that category getting injured.

In the spirit of sharing, we’ve put together a special series of tips for investors collected from throughout SparxTrading.com’s collection of great articles, interviews and reports.  Be sure to check back here daily through December 25th for the latest tip or follow us on Twitter to get updates on when they’re released.

Investor Tip #12: Know When to Take a Loss

This gem was provided to us from veteran trader Victor Adair as part of the series Mistakes Investors Make. Click to read about why Victor Adair thinks its crucial that investors know when to take a loss.

 Investor Tip #11: Take Ownership of Your Investing Decisions

This next tip comes to us from an interview with Josef Schachter. In our interview, he shared some brief but insightful comments for investors. Chief among his thoughts was the importance of knowing what you (as an investor) are choosing to invest and who you’re choosing to invest with. Read more of what Josef Schachter had to say here.

Investor Tip #10:  Buy the Business, Not the Symbol

Ryan Irvine, from Keystone Financial, provides this piece of investing wisdom.  Often times investors can get caught up in the hype of a particular name or stock symbol and forget about what it is that gives the stock real ‘value’.  Click the link to learn more about Ryan Irvine’s perspective on avoiding this common investing mistake.

Investor Tip #9: Build a Solid Foundation

The saying goes, “it is a wise man who learns from his mistakes but it is a fool who doesn’t learn from the mistakes of others.”  The benefit of hearing what experienced investors have to say about getting involved in markets is highlighted in this video on getting started with investing.  Noted expert on business valuation Ian Campbell provides his 10 timeless tips for all investors to consider when participating in stock markets.

Investor Tip #8: Pick the Right Advisor for Your Needs

When it comes to investing, there is no shortage of opinions or trading styles. Learning to find the right financial advisor for your investments, however, entails finding someone who you can share ideas and opinions with and who shares a similar style of investing. In this video tip, Reg Ogden shares his views on how to pick the right financial advisor.

Investor Tip #7: Make Sure to Have a System

Whether you prefer technical trading or value investing, having a system (and the discipline to follow the rules of the system) is crucial to successful trading. For beginners, there are some additional considerations that need to be made before jumping in to the investment pool with both feet. Find out what 3 tips Danielle Park has to offer for beginner investors.

Investor Tip #6: Trading is Simple but not Easy

Many people believe that trading on the stock market basically comes down to making a few clicks with a mouse and magically money will appear. What many of those people don’t realize is that trading is about making decisions that involve money – and the risk of losing it. That little cognitive monkey wrench can wreak havoc when it comes time to decide what actions to take and when to take them. These tips from Stockscores founder Tyler Bollhorn help to explain why trading may be simple but not easy.

Investor Tip #5: Trading is Not Gambling

While the element of uncertainty is common to both trading and gambling, there is a big difference between speculating with structure and simply guessing to be entertained. Read more about this concept in the summary of chapter 3 of The Mindless Investor along with two other really important points related to becoming more aware of your investing personality.

Investor Tip #4: Becoming a Successful Trader Takes Time and Training

Becoming a great trader or investor doesn’t happen overnight. Like any skill, trading takes time and effort in order to be mastered. Today’s tip comes from chapter 5 of The Mindless Investor, which explains why taking it slow and steady is the better way to improve as an investor.

 

Investor Tip #3: Use Your Size to Your Advantage

Unlike most institutional investors, retail investors aren’t going to be managing multi-million or billion dollar portfolios. For that reason, the kinds of trading opportunities and strategies that smaller investors can take advantage of are sometimes out of range for larger players. In this series of tips from chapter 6 of The Mindless Investor, find out how smaller traders can use their size as an advantage.

 Investor Tip #2: Remember the 3 D’s of Investing

With all of the information and/or noise that investors have to filter through, one of the best tips for investors to remember is to try and keep things simple. Unfortunately, that’s easier said than done. There are, however, 3 important traits that all successful investors and traders share. Read more about how the 3 D’s of investing: Discipline, Diligence and Decisiveness, can help improve your trading or investing performance.

Investor Tip #1: Consider the Risk vs Reward

If there were a golden rule in trading or investing, considering the risk vs reward on any transaction would be it.

All experienced traders and investors accept that there are going to be instances where they ‘get it wrong’ or when they ‘get it right but at the wrong time’. The savviest traders and investors, however, manage risk from the outset by identifying whether there is a plausible prospect for a reward, and whether that reward substantially outweighs the risks (usually by a factor of 2 or more) associated with the trade. By focusing on those candidate trades that offer a better risk/reward profile, not only are you shifting the odds for success in your favour, but you’ll also likely make fewer trades and have an easier time researching opportunities and managing your portfolio.

We hope you’ve enjoyed the 12 days of investor tips. One of the great things about trading in the stock markets is that it changes constantly and so it requires a commitment to lifelong learning in order to stay in top trading form. Whether you’re a passive investor or an active trader, remember to keep earning you have to keep learning.

 Have you got an investing lesson or tip that you would like to share? Feel free to do so in the comments section below.

 

As part of an ongoing study, Dalbar Canada, a leading financial services research firm, is gathering feedback from Canadian retail investors for the purpose of improving the content and design of financial investment statements (including RSP, pension, non-registered account statements, insurance etc) commonly used by Canadians.

The survey takes approximately 15 – 20 minutes to complete and the data collected will remain anonymous.   Once the survey is completed, send a confirmation email to [email protected] to redeem your choice of a Tim Horton’s or Starbucks gift card (approximate value $5).  The deadline to complete the survey is December 15th, 2013 at 11:59 ET.

To participate in the survey, click here. If you have friends/family you’d like to share the link with as well, please feel free to do so.