Professional trader Ray Rondeau recently appeared on An Eye on Investing with Dr. Richard C. Laudon. Rondeau has served as a trade analyst for IndexUniverse, and has published articles on NASDAQ.com and Yahoo Finance. He speaks regularly to investment groups in New England about trading, investing and technical analysis, and is President of the Boston chapter of the American Association of Individual investors. In this appearance on An Eye on Investing, Rondeau discussed the many different strategies in investing, and the importance of developing a concrete investment strategy.
Rondeau does not believe there is a universal approach or strategy that fits all investors. Each individual is in a unique situation and all aspects of that situation must be considered in developing a strategy. This includes the financial circumstances, investment horizon, risk tolerance, and individual analytical skills. Early on, Rondeau believes, each individual investor should decide whether he or she wants to delegate any development of this to a professional or do it independently. He briefly discusses pros and cons to each approach, but concludes it is up to each individual as to which works better for them.
While there is not a universal strategy or common approach, Rondeau believes there are certain concepts and traits that tend to be found in successful investors. Discipline, hard work, confidence, willingness to stand alone, and patience with the chosen strategy are the most common of these. He discusses the book “Market Wizards” by Jack Schwager, which buttresses this point nicely and is a recommended read for investors at any level of expertise.
To develop his point about needing to keep disciplined to a concrete strategy, Rondeau discussed how human emotion sometimes works against an investor in our market system. He discusses the presence of “self-sabotaging impulses” and the pitfalls they can create. He cites an example of an investor who purchases a stock at $40, expecting it to grow to $60 over time. If, shortly after purchase the stock price drops to $25, an investor directed by anxiety and fear may lead him to impulsively sell the stock at a low, in contravention to the disciplined long-term strategy the investor should have employed. Tailoring a strategy that accurately reflects an investor’s risk tolerance, and all other unique factors, is critical, as is the discipline to stick to that strategy. Strategies that succeed are those that work best for the individual, taking all factors about the individual’s situation into account, and that are maintained through hard work and discipline.
Having run out of time, Rondeau and the hosts promised another appearance as soon as possible on An Eye on Investing, where Rondeau could discuss the important role technical analysis plays in investing.
To learn more, or to hear the complete interview, please click here.