Something I’ve realized especially after these few days of turbulence is – the need of having buy and sell “rules” in my investment strategy.

And not having rules is what burn beginners, or those who might not be beginners but are constantly losing in the markets.

What does having rules or strategies mean?

So the most basic investing strategy is probably the DCA, dollar cost averaging method.

You don’t care if the market is up or down. You set a date and you invest a fixed amount, month after month.

So the rule for this strategy is – buy $X on the 1st of each month.

Someone following this strategy and this rule don’t have to think about what they need to do – they just do.

Importance of having a strategy and following rules

And in investing this is important because, people are emotional creatures.

And often emotional trades are losing trades.

A rising market cause people to buy based on FOMO and it’s hard to sell at any point, even after it starts dropping – because it might just be a small pullback.

Sometimes it’s indeed a small pullback, but sometimes it’s a trend reversal.

Then on the way down you just want to sell based on fear, and often you won’t be able to sell beyond the purchase price.

Even if you did sell before the purchase price – now it keeps dropping and you just wait.

When do you buy back in? when it starts coming back up?

But it could just be a dead cat bounce. It might go back down again.

So you are scared and you wait and wait – often before you know it, the price recovers to where you sold and further.

Emotion investing tends to be “buy into strength, sell into weakness”, and while that might work for traders who are really good at reading charts and predicting trends, for a laymen it’s basically recipe for disaster.

My New Investment Strategy and Rules

I actually succumbed to some of those pitfalls mentioned.

Buying the N225 at 39000 based on FOMO and getting burned, twice.

For some reason I was much more composed buying US stocks and haven’t had much issues there. Maybe because I started with JP stocks first when I was less knowledgable.

In any case, now I’ve set up some solid rules around my investing, and I use the “buy into weakness, sell into strength” mentality.

I allocate a certain percentage range of the entire portfolio to US stocks, say 12-18%.

During a bull market, I’ll let it ride to the upper side – and it’ll naturally rise because of the increase in value.

Up to a certain point, I’ll start selling into strength, and trim down the holdings to not let it run above the max percentage.

During a bear market, it’ll start riding to the lower side – and I’ll start at say 14% and “buy in stages”.

I’ll buy when it drops down 14%, but buy back to 14.5% and resetting the lower limit to 13.5%. As the market keeps dropping, I keep buying in small stages and keep lowering my overall percentage to limit the drawdown side.

And once it starts recovering, I’ll just let it ride and now I have more shares to ride on. Up until 18% before I start trimming again.

It will take HUGE patience but it is a guarantee way to “buy low, sell high”.

The most important thing is, I now don’t have to rely on spontaneous judgment on whether it’s buying time or selling time. I’ll let my portfolio and the price movement tell me.

And I’m not worried if the market falls – because then I can pick up more cheap stocks. I’m still excited for a bull run though but I do need to trim down when the risk exposure gets too big.