Personalized Money Management

My Investment Approach

What is my investment approach? It became apparent to me many years ago that Wall Street securities analysts are unable to thoroughly cover the thirty or forty stocks assigned to them in an in depth manner. I therefore rely on ultra-diversified portfolio management, primarily using three vehicles: Exchange Traded Funds, Closed - End Funds, both of which are listed and are actively traded on major stock exchanges and individual securities which adhere to vigorous fundamental and technical analysis.


While most large money management firms plug their clients into rigid computer models my decisions are based on a synthesis of fundamental data and proprietary technical tools with which I have been working for over forty years. I use computer technology for much of this analysis but decisions are finally made to buy or sell based on a combination of data and my intuitive feel for the market honed by 50 years of experience. Another distinction between my approach to portfolio management and that of larger companies is that I am not hesitant to sell stocks even if it entails a loss. Many analysts and managers allow their egos to cloud their judgement and resist taking a loss when the market is clearly screaming that they have made a bad decision. I'm a great believer in the wisdom of the market place and if a security is acting poorly there is invariably a reason for it which will ultimately surface. I am also not adverse to sitting with substantial positions in interest bearing bond or preferred stock funds if market conditions warrant it. I use stop loss orders extensively (orders to sell if a stock falls below a specified price) in order to limit losses. This conservative approach means that i will always outperform the popular averages in bear markets.


Exchange traded funds, or ETF’s, are packages of stocks representing either an index such as the Dow Jones or Standard and Poors or a specific area of investment such as drugs, financials, technology, or a particular country’s securities. There are now thousands of these to choose from and the portfolio held by an ETF rarely changes therefore management fees are minimal. Closed end funds (CEF’s) are similar to ETF’s although the stocks held in CEF’s are actively managed by a fund manager. In both cases, however, the shareholder participates in ownership of many stocks held by the ETF or CEF, thus offering broad diversification and protection should several stocks in their portfolio fall out of favor or are shocked by unexpected corporate developments.

Steven Sherman

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