Constant Value Investing

A recommended investment strategy is that of maintaining a constant value for the stock (or option) that you purchase. For example, you buy 1000 shares of ABC Corp. for 25 per share. That is an initial value (and constant value) of $25000. At the same time you will commit 10% ($2500) cash as a reserve to buy more later if needed. Your objective now is to keep your constant of $25000 in ABC Corp. You will monitor its price each day and adjust your position in ABC Corp. to keep it value at $25000. If it goes up enough that you can sell 100 shares and still have a value of $25000 in the stock, sell 100 shares. If it goes down enough that you need to buy 100 shares to get the value back up to $25000, buy 100 shares. You may do this in both directions several times while you hold the stock. The effect this produces is that you are always selling while the price is up and buying while the price is down. Always buy and sell stock in lots of 100 shares (and options in lots of 2). This will allow you to profit from a 10% move in prices. You will continue to monitor the value each day while you hold the stock and make an adjustment when necessary.

The amount that you commit to reserve is to be considered a common reserve to be shared between all of the entries that you are managing with the Constant Value Investing strategy. To explain this, in the example above you would have committed $2500 to reserve for your position in ABC Corp. You may also have another position in XYZ Corp. for which have committed $1500 to reserve. You now have a common reserve pool of $4000 that may be used to buy additional shares of either stock as needed. The important thing to remember is that before you enter into any new positions on other issues that you must keep your reserve pool. Don’t deplete your reserve pool to open new positions because an important element of this strategy is to always have funds available to buy more shares when the price is down.