Category Archives: Trading Lessons

Trading Blue Chip Stocks

Blue-chip stocks are the bread and butter of most successful long-term investors. These stocks are also typically the most well-known, stable, and profitable companies in the world.

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There are many reasons why blue-chip stocks are so popular among investors. For one, they offer stability and liquidity.

These stocks are also typically less volatile than other types of investments, and they tend to be easier to sell than other securities.

Additionally, blue-chip stocks typically offer high dividends and strong earnings growth. Many of these companies are household names, and their products are known around the world.

This gives investors a sense of confidence in these businesses. Finally, blue-chip stocks are usually among the most profitable companies in the world.

This means that they can offer investors significant capital gains potential. There are many different ways to invest in blue-chip stocks.

For example, an investor could purchase shares of a mutual fund or exchange-traded fund that focuses on these securities.

Alternatively, an investor could buy individual stocks in some of the world’s largest companies.

No matter how an investor chooses to invest in blue-chip stocks, it is important to do their homework first.

It is important to understand the underlying businesses, and to make sure that the stock prices are reasonable.

Blue-chip stocks can be a great way to build wealth over the long term.
By investing in these stocks, investors can enjoy stability, income and capital gains potential.

Risks trading Blue-chip stocks

Blue-chip stocks are some of the most reliable and safest investments an individual can make.
However, even these stocks come with a certain amount of risk.

Trading blue-chip stocks can be a profitable venture, but it is important to understand the risks involved before making any decisions.

A risk associated with trading blue-chip stocks is the potential for a company to go bankrupt.
While it is rare for a blue-chip company to go bankrupt, it is not impossible.

If a company declares bankruptcy, the stock will likely plummet in value, and the investor could lose all or at least a significant amount of money.

Also, blue-chip stocks are not immune to the stock market downturns.

When the stock market declines, blue-chip stocks are often among the first to fall. This can lead to significant losses for investors who are not prepared for a market downturn.

Despite the risks, trading blue-chip stocks can be a very profitable venture.

By understanding the risks involved, investors can make more informed decisions and hopefully avoid any major losses.

The best-known blue-chip stocks

Some of the best-known blue-chip stocks include companies such as Apple, Coca-Cola, IBM, Microsoft, and Pepsi etc.

These companies are all household names, and they have all been around for many years. They have also all been profitable over a long period of time, and they have a history of paying dividends to their shareholders.

Trading Lessons From A Legendary Trader

Jimmy Rogers is one of the most famous traders in the world and with good reason – he is one of the best – A well-known commodity trader, he gained even more fame after working with George Soros at the Quantum fund and also has managed his own fund which has one of the best performance records of all any publicly quoted fund.

History

Jim Rogers started trading the markets in 1968 with just $600.00 and never looked back. In 1973, he met George Soros with whom he started the Quantum Fund which became one of the top performing funds of all time, Jimmy was the analyst for the fund while George Soros did the trades. This partnership saw the fund make gains approaching 4000% while the SP 500 could only manage 50% in the same period.

Rogers created “The Rogers International Commodities Index” and fund which has had the best performance record of any fund, regardless of asst class, over several years, with returns approaching 170 %.

Between 1990 to 1992, he travelled through China, as well as around the world, on motorcycle, over 100,000 miles (160,000 km) across six continents and talks about his trip and investments in the book Investment Biker.

Between January 1, 1999 and January 5, 2002, Rogers did another Guinness World Record journey through 116 countries, covering 245,000 kilometers with his wife and wrote Adventure Capitalist following this around-the-world trip which remains his bestselling book.

Investment Philosophy

Patience

Rogers believes that one of the keys to success in investing is waiting for the best trades wherever they maybe and then trading them hard rather, than what most traders do which is – trade more than they should and simply trade for the sake of trading; they end up taking lots of low odds trades and lose.

The Market Doesn’t Matter the Potential for Profit Does

Look anywhere for investment opportunities, don’t restrict yourself to just one asset class because if you do, you will be missing opportunities for profit.

Jimmy is a big fan of commodities which many traders for example ignore. In addition, Jim has travelled the world searching for the next big market to invest in and his travelling has given him an on the ground insight to many of the best trading opportunities.

Trade Only Markets Which Are Moving

If for example, a market is to go sideways for a long time, to avoid investing money and tying it up for long periods wait for signs that the market is changing from bearish to bullish before getting on board

If you get in to early you might have to wait a long time and see little return on your investment.

Use Fundamentals First, Charts as Backup

Jimmy Rogers doesn’t trade with Technical Analysis and charts and doesn’t believe that they give clues to the future, he only looks at charts to see what has happened in the past but does not use them to predict the future and in many ways, this is sound advice because, the future cannot be predicted at all.

He only invests in assets which have strong fundamental reasons to be trending and looks for value in the market traded.

Invest for the Long Term

Many investors focus on too short a time period and are in a hurry for their investments to perform. In his fund the weightings in his of the commodities traded hardly change over time. This view of focusing on value and riding trends has seen his fund outperform all others.

Sell Greed and Hysteria

This is simply contrary trading and if a market has gone too far from fair value Jim would sell aggressively after studying all the fundamentals and enter and hold and it’s a fact that Jim will hold and allow positions to go against him significantly, but he will hold on if he is right and let the move blow itself out.

Know When to Get Out

In money management of course you need to know when to get out, but Jim has a very aggressive way of trading he is quite prepared to admit he is wrong and if he has misread a situation as he says “the first loss is the best loss” but if he thinks he is right he is quite prepared to sit out a blow off and wait for hysteria to end.

Of course, he’s normally trading a lot of money and has a lot of positions so he can afford to which many traders can’t but it’s true that all short-term price spikes are of a random nature and always end. His insight into market value and breadth of knowledge allows him to do this when other traders might be very scared!

Ignore the Majority!

This leads on from the points above and it is a key trait of all the great traders to be able to stand aside from the crowd and see, things that the majority don’t see.

Jimmy Rogers Books

1995: Investment Biker: Around the World with Jim Rogers.

2003: Adventure Capitalist: The Ultimate Road Trip.

2004: Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market.

2007: A Bull in China: Investing Profitably in the World’s Greatest Market.

2009: A Gift to My Children: A Father’s Lessons For Life And Investing.