The Dangers of Market Multitasking

The ups and downs of the stock market can challenge the most sane among us. The cultivation of
patience is critical if an investor wants to be successful.
Learning how to be less impulsive and more contemplative when picking stocks is an art.
Patience allows you to take control over your trading instincts and make positive investment choices.
A bombardment of advice from different sources can often overwhelm a trader.
In an effort to become a well-informed investor, some of us mistakenly believe that taking in every
single piece of information will inevitably lead to success.
esearch shows us that multitasking does not increase productivity.
What Are the Dangers of Implementing Trial & Error Marketing
Plans?
Trial and error is the downfall of many marketers who think that simply testing a variety of
marketing tactics can lead them to success. In truth, successful marketing re!uires a plan. "y their
very nature, marketing plans should help to avoid trial and error marketing. If they don#t, they can
lead to a variety of dangers including missed opportunities, inadvertently boosting the competition,
leading with the wrong price point and $ ultimately $ wanted time and resources.
Failing to Clearly Understand the Target Market
%imply trying things to see what works often overlooks a key step in the marketing planning process
$ clearly identifying and understanding the target market. %ocial media is a good e&ample of this.
'hile social media may work for some organi(ations attempting to reach certain markets, it is not
appropriate for all organi(ations and markets. )ot understanding specific markets can lead to the
selection of the wrong communication tools as well as the creation of key messages that fail to
resonate and influence these audiences.
Inadvertently Promoting the Competition
Trial and error can lead to errors that may inadvertently benefit competitors. *arketers that have not
taken the time to understand their markets or fully recogni(e what the competition has to offer and
how the competition has already positioned itself may create and communicate messages that are
more supportive of competitive offerings than their own. +or instance, a long-standing business may
be widely known for its use of high-!uality raw materials and comparatively low price. A competitor
entering the market and promoting high !uality may, unintentionally, reinforce the competitor#s
messages rather than differentiate its own benefits.
Leading With the Wrong Price Point
Trial and error marketing can create significant problems in terms of price point. ,nce a business
enters a market at a particular price level changes, either up or down, can be problematic. -ntering at
a price that is too low and finding that demand far e&ceeds e&pectations, for instance, may make it
challenging to later attempt to increase prices in the same market. .onversely, entering at a price
point that is too high and later trying to decrease prices can have a negative impact on brand image.
Wasting Valuable Time and esources
/ltimately, the greatest danger in trial and error marketing is that valuable time and resources are
wasted. Taking the time to develop a plan that is based on the clear identification of goals and
ob0ectives, a thorough understanding of the target market and competitive landscape and ade!uate
research and understanding of available communication tools and tactics can yield wise choices that
ma&imi(e resource allocation. Trial and error can be tempting and may seem like the !uick and easy
route to take. /nfortunately, though, !uick and easy is rarely the best option when it comes to
effective marketing.
What Are the Dangers of Investing in Stock?
Investing in the stock market can be a good way to build wealth, but it can also be dangerous. "efore
you invest any money in the stock market, it is important to evaluate both the potential advantages
and the risks of buying stock. /nderstanding the pros and cons of the stock market is the best way to
make an intelligent and informed investment decision.
!" Volatility
o Anyone who has spent any time watching the stock market knows how volatile stocks
can be. The stock market can be up hundreds of points in a single day, and down even
more the very ne&t day. It is impossible for even professional investors to accurately
predict the short-term movements of the stock market, and investors who are
unprepared for that volatility could be frightened out of the market at its lowest point.
#" isk o$ Loss
o /nlike certificates of deposit, Treasury bonds and savings accounts, the stock market
carries no government guarantee. If a stock loses value, you can lose some or even all
of your money. 'hen you invest in a single company, there is always the risk that the
stock will go to (ero and you will lose everything you invest. 1ou can mitigate this
risk somewhat by purchasing mutual funds instead of individual stocks, but when the
stock market falls, stock funds will suffer as well.
%" Poor Timing
o Investing too much money in the stock market when you are close to retirement can be
dangerous. If the stock market turns against you 0ust as you need to start withdrawing
the money, your nest egg could be depleted early. A poor stock market at the start of
your retirement could also reduce the amount you can draw out of your stock portfolio,
reducing your standard of living or forcing you to work a bit longer.
The Dangers of Market Timing
*arket timing may be the two most dangerous words in investing, especially when practiced by beginners.
*arket timing is the strategy of attempting to predict future price movements through use of various
fundamental and technical analysis tools.
The real benefit of knowing what is going to happen is that your return from buying a stock before it takes off
is obviously better than if you have to buy the stock on its way up.
Buy Low, Sell High
*arket timers are the ultimate 2buy low and sell high3 traders. 4ay traders, who move in and out of positions
in minutes or hours, are the e&treme market timers. They look for small profits by the do(ens each day by
capitali(ing on swings in a stock5s price.
*ost market timers operate on a longer time line, but may move in and out of a stock !uickly if they perceive
an opportunity.
There is some controversy about market timing. *any investors believe that over time you can5t successfully
predict market movements. *arket timing becomes more of a gamble in their opinion than a legitimate investi
ng strategy.
Market Timers
,ther investors argue that it is possible to spot situations where the market has over or under valued a stock.
They use a variety of tools to help them predict when a stock is ready to break out of a trading range.
/nfortunately, stock prices do not always move for the most logical or easily predicable of reasons. An
une&pected event can send a stock5s price up or down and you can5t predict those movements with charts. %ee
my article, /nderstanding %top Loss ,rders
The Internet stock bull market of the late 6778s was a good e&ample of what happens when investors in the
e&citement of the moment, consciously or not, became market timers.
Next Big Thing
-very one had a hot tip about the ne&t 2big thing3 and investors were 0umping on stocks as they shot up.
/nfortunately, most of these rockets came crashing down 0ust as !uickly and many investors held on way too
long.
The disastrous result was an e&act reversal of what they hoped. In the end, it was a case of 2buying high and
selling low.3 1ou don5t need to know much about investing to know that5s not a successful strategy.
+or most investors, the safer path is sticking to investing in solid, well-researched companies that fit their
re!uirements for growth, earnings, income, and so on.
Conclusion
If you look for undervalued stocks, you may find one that is poised for moving up sharply given the right
circumstances. This is a close to market timing as most investors should get.
The Dangers of Anticiating a Market !e"ersal
aise your hand if you are anticipating a bearish reversal in stocks in the near future. 9reat. Lots of
hands here... )ow let5s be honest, how many were also e&pecting a reversal a week ago: a month
ago: ever since the calendar turned to ;86;:
*arket reversals are notoriously difficult to predict, which is part of the reason why many successful
investors stick e&clusively to trend following strategies. If one bets on a market reversal such as a
correction during a bull market and it doesn5t happen, not only is there a loss associated with a short
position, but there is also the opportunity cost of not having participated in the rally.
The worst part of trying to anticipate a market reversal, however, can be the psychological damage.
If an investor thinks that a market is overbought or overvalued, then gets short and covers that short
after the market continues to rise, they often subse!uently have to wrestle with a mental block that
makes it even harder to get long in a market that now appears to be even more
overbought<overvalued.
%o what is a savvy investor to do when he or she believes that stocks have risen too far too fast:
,ne approach is a stock replacement strategy. This approach consists of selling e&isting long
holdings and replacing these with e!uivalent long call positions =6 contract for every 688 shares
held.> A stock replacement strategy allows an investor to participate in any subse!uent bullish
moves, yet limits losses to the cost of the options purchased. 'hile all stocks and other securities do
not have options associated with them, there are always inde& options and options on a wide range of
e&change-traded products =-TPs> available that are close appro&imations for the original holding.
+or investors who think stocks are more likely to tread water than correct sharply, covered calls =or
buy-write strategies> are an appropriate strategic choice. ?ere there are -TPs which can e&ecute such
strategies, the most popular of which is the Power%hares %@P A88 "uy'rite Portfolio -T+ =P"P>.
A third approach might be to rotate into less volatile holdings such as the popular Power%hares %@P
A88 Low Bolatility Portfolio -T) =%PLB>.
Investors who are looking to hedge their e&isting long e!uity positions without rotating into options,
covered calls or low volatility holdings might want to review my recent 4ynamic BIC -TPs as
Long-Term ?edges, which focuses on BDT and CBE.
Duite a few talented investors have missed out on the ;86; rally and despite what you hear on .)".
or read in your favorite financial publication, there is no guarantee we will get a big pullback
anytime soon. In the meantime, there are a number of approaches that will allow investors to benefit
from any continued bull moves, while minimi(ing downside risk. In addition to some of the
approaches outlined above, the links below should be a good source of information for e&plaining
some alternative approaches as well as the nature of the recent market moves.
6. Trial and error is the downfall of many marketers
2. Failing to Clearly Understand the Target Market
%" Inadvertently Promoting the Competition
&" Leading With the Wrong Price Point
'" Wasting Valuable Time and esources