Got By With a Little Help From a Friend

I was surprised tonight to see that it's been almost two weeks since I left off talking about my investing history. I want to pick up that topic again.

Having determined in 1997 that I was unable to successfully develop the technical skill and market timing necessary to use the CAN SLIM methodology, I resigned myself to investing my money into an S&P 500 Index fund.

Actually, this really isn't a bad option for many people. If anyone asks my advice on investing (and even sometimes when they don't ask) I'll suggest that if they don't want to make a second job out of it, the S&P 500 Index funds are the way to go. Certainly there are time horizon factors to consider, but the point is that if you can get something like 10% over the long run you should come out OK. All of my 401k and IRA money goes into mutual funds, and 33% of it is in S&P 500 Index funds. The rest is in Energy, International, and Small Cap Value funds.

From time to time, I would break out the Pitbull Investor system again and paper trade it for awhile. I always felt it was rooted in sound principles - those from 'How to Make Money in Stocks' - and I kept hoping I could put it to use. I never did get the kind of results I was looking for, though. I could not find any purely mechanical way to screen the paper that would yield even half of my picks being winners. Still, I continued trying.

Then a couple of years ago I switched teams at work and was paired with a consultant who developed and supported the application we use to request access to IT systems for our company. He had a good reputation as a sharp guy, and it didn't take long for me to believe he'd earned it.

It is interesting to me how things can fall into place in life sometimes. I don't want to get too existential on a blog devoted to investing, but in retrospect it's interesting to me that at the same time I began working closely with this consultant (we were and still are a two man team) I also began a process of personal re-evaluation.

I became very dissatisfied with the way I was spending my free time. I watched what I think is the average amount of television, but when I thought about what was on I became disgusted that I watched any. I have over 100 channels, and most of them are some reality (which is nothing like reality) based nonsense - why would I watch someone else's life instead of living my own?

I had a wife and a newborn son and felt that I needed to set a better example for him. I wanted to use my time wisely and effectively, so I committed myself to reading during my free time instead of watching television. It was a small gesture, but it coincided with a conversation with my coworker that started me down this path - perhaps I should say got me to continue down the path that had started some years ago.

We were talking and I asked my coworker what he did with his free time. He said tennis and investing. I recounted my interest in investing and asked him if he had a methodology. He said he used the CAN SLIM method.

I told him I had tried this and could not make it work. I said that I had settled on mutual funds and was happy with that. To his credit, he wouldn't let that slide. He made some kind of remark that made it clear he thought it was pretty weak to accept a return that low. I think I made some further excuses about not having the time, but both of us knew that I was full of crap.

This conversation stayed with me and nagged at me. I started to bother him at work with more questions - I wanted to know how he'd made it work. I was frustrated because he was very guarded about what he owned (to this day he will not tell me what he's bought) and instead of giving me answers to all my questions, he'd tell me where I could find the answers.

Though it frustrated me then, I'm know grateful for the way he helped me. He forced me to take responsibility for my investing education and growth. I bought almost every book he recommended to me: the new edition of 'How to Make Money in Stocks,' 'How I Made $2,000,000 in the Stock Market,' 'How to Trade in Stocks,' and 'The Battle for Investment Survival.' I read the first three (this was about my fifth read of 'How to Make Money in Stocks' - I use it as a reference regularly) and I'm reading the fourth now. I subscribed to the electronic edition of 'Investors Business Daily' and began reading it every day. I went through the Investors Education section of the website and absorbed what I could (it's HUGE).

Once I was making these efforts, my coworker would answer my questions - though often I still could not understand his answers. I'd look at a chart that I thought was great and he'd point out that there was more distribution than accumulation, that the sides of the cup pattern were too steep, that the RS line was lagging... I couldn't see what he could.

Still, I felt I was getting close to putting things together, if I could just get a handle on the technical aspect. That's when I discovered Market Edge.

-Geoff