Big Moat Stocks (formerly Rule 1 Numbers)

One of the good things about the Big Moat concept of investing is that once you do your research on a company, running the numbers and executing buy/sell orders using the tools takes a lot of the “thinking” out of investing. I imagine this is why Big Moat investing appeals to a lot of people who might not have traded in the stock market before or to people who may have not done so well with their investing in the past. The Big Moat concept works especially well in the minds of new investors when their first few trades go well, some people may even get the feeling that they can’t lose, and that’s a great feeling.

The problem arises when the first loss does roll around, and it will. There’s just no avoiding it. Hopefully it won’t be a big loss or, lord forbid, a overnight gap down like we saw with Chico’s as few weeks back. This one losing trade may be enough for many people to take all of their money out of the market and throw their hands up and scream that it doesn’t work. So what do you do to avoid this happening to you? In a post today, Brett Steenbarger offers a solution that is simple in its concept but will be difficult to actually follow. If his idea is something you can instill in yourself, it will allow you to become a better investor. His concept is to accept that you will lose money on the trade you’re about to execute. By making the loss the expected event, a winning trade will have much more significance which is the way it should be. If you’re expecting the loss and the trade is in fact a loss, then you got what you expected - no harm/no foul, just move on to the next trade when the tools show its time to buy.