By Paul Goodwin, Cabot Analyst and Editor of Cabot China & Emerging Markets Report
From Cabot China & Emerging Markets Report 2/21/08

Here's a couple of things you can do while you're waiting for the market to make up its mind which way to hop.

1. Review your trading history

It's amazing how many people have been investing in stocks for years without ever taking an objective look at their successes and failures.

The best way to do this is to print out a chart of the stock in question and then mark the point at which you bought and when you sold. Then ask yourself whether you bought too high or held on too long (the two most-common sources of bad performance). Other negatives to look for include selling too quickly (often the result of using overly tight trailing stops) or overconcentrating on a few positions.

The Cabot China & Emerging Markets Report is considered to be fully invested with a portfolio of 10 stocks.  We aim to own the strongest stocks in our investment universe, but we also pay attention to diversification across markets and sectors. You should aim for equal-dollar positions that commit about 10% of your total portfolio value to each stock. If you have taken a big loss from owning too many stocks in one sector or having too high a percentage in one stock, consider changing your guidelines.

When markets are supportive, we use a loss limit of 20% below our original purchase price, tightening that to a 15% loss when markets are in a downtrend. (Many times we'll try to get out before that.) If you have suffered bigger losses, you might want to do a little work on your sell disciplines. Hope (as in "I hope that will go back up") is no substitute for hard-nosed realism.

2. Build your watch list

The more you know, the better investor you'll be. For most people that means spending some time cruising the Web for articles and opinions on emerging markets and stocks.

It's easy to find information, of course; a quick Google search on "emerging markets stocks" turned up 1,570,000 results in just 0.2 seconds.

The hard part is developing a critical eye and a skeptical frame of mind that will allow you to take all the opinions out there at about 10 cents on the dollar. Opinions can be very persuasive, and there's no shortage of people who are absolutely certain that they know what a market or stock will do. They're often wrong, of course, but that doesn't seem to deter them. And it's useful to know what people think, because the sum total of what people think is exactly what moves the markets.

Building your watch list means picking a stock and getting to know it. The more times you research a company's fundamentals and then stack them up against the stock's chart, the easier it will become to see the patterns. It will also help you to see when the two disagree, which is an even more valuable lesson.

Going back into our archives on the Cabot Web Site, www.cabot.net, will also prove useful, as you can follow our analysis, gauge our results, and re-learn the stories of our current recommendations.

It's good to have good advice, but there's no substitute for your own judgment and experience. It's your money that's being invested, and you want to put the odds in your favor.

More Stock Investing advice:

Two Lessons from Stock Performance Champs 2/11/10
Paul Goodwin finds there's no substitute for buying well and a supportive market.

Cabot's Position on Shorting Stocks 1/27/10
Cabot Market Letter Editor Michael Cintolo explains Cabot's position on shorting stocks.

Why the Lost Decade is Good News for the Future 12/16/09
So-called “lost decades” for investors in the past have usually ushered in powerful new bull periods.

Ten Tips for Your  Investing Toolkit 12/10/09
These tips will set you on the path of investing success.

Three Short Lessons for Investors Just Getting Started 12/4/09
These three short lessons will help you get started on the right track.

Three Characteristics of Winning Investors 11/26/09
Here are three particularly important traits of successful investors.

The Three Most Important Investing Lessons 11/6/09
Timothy Lutts focuses on the three most important lessons for successful investing.

Dispelling Investment Myths 10/15/09
Mike Cintolo busts five common investment myths.

A Simple Way to Assess Your Risk 10/1/09
A "position sheet" will give you a great view of your portfolio's risk and rewards.

Three Reasons to Own Individual Stocks 6/22/09
Paul Goodwin offers three reasons to invest in individual stocks over mutual funds.

Guidelines on Handling Earnings Gaps 4/22/09
Here are four guidelines to help you profit from earnings gaps.

How to Handle Earnings Season 4/19/09
Michael Cintolo offers three options for handling earnings season.

Three Clues to Determine the Market's Next Move 1/22/09
Here are a few clues to watch, so you can be one of the early ones on board the next move...whether it's up or down.

Advantages to Being an Individual Investor 1/12/09
Three ways individual investors have advantages over mutual funds.

Dispelling Six Common Investing Myths 7/3/08
Avoid some of what doesn't work in the stock market and improve your returns.

Listen to Your Stocks  4/23/08
A big earnings gap lower, especially after a stock has enjoyed a huge advance, often spells the end for a stock's up cycle.

Practice Patience Early in a New Bull Market  3/29/08
Considering the risk that you might buy at a false bottom, we don't think the risk is worth the reward.

Tips on Handling Market Stress  3/15/08
Having a system will help you manage market stress especially when the market's most volatile.

How to Invest During a Recession 1/17/08
Timothy Lutts is watching charts and finding bargains.

On Improving Your Personal Side of the Investing Equation 2/25/08
Eight ideas to help you improve your personal moneymaking habits from "New Market Wizard" by Jack Schwager.

SNaC to Keep Your Portfolio in Shape 2/11/08
SNaC stands for Story, Numbers and Chart, and it's the method Paul Goodwin uses to pick stocks for the Cabot China & Emerging Markets Report.

Be Ready to Buy when Market Leading Stocks are on Sale 2/1/08
The worse the economic chaos gets…and the lower the market goes…the better you like it.

What to do when Sellers are in Control of the Market
When the sellers remain in control, this Q&A will help you decide what to do.

Why Recession Really Doesn't Matter to Investors
Should you wait until the recession ends before you invest? No—because all stocks trade on expectations of the future.

Technical Analysis: Free Yourself from Why
The best investors generally free themselves from the question of why a stock or the market is going up or down.

Keeping Your Balance during Market Turbulence
If you're an investor, you're worried. That's what you get paid for. Here's something to keep in mind during turbulent times.

Growth or Value Investor? Depends on your Investing Temperament
Which strategies are best for you? It’s all a matter of temperament.

Are you a Growth Investor or Value Investor?
The most important thing for you to understand about investing in stocks is yourself.

Know Thyself. Match your Investing System to your Personality
What really matters is matching the system's pros and cons with your own personality.

10 Things to Know About Investing
After 22 years in the business, Timothy Lutts shares 10 things he knows.

Stock Prices: Important and Nothing
It's value and opportunity, not the price of the stock. And then there's December...

Follow Your System
Your first task is to clearly identify your system; your second, and most difficult, is to follow that system.

Fundamental or Technical Analysis: The Perils of Purity
Following either of these investing styles exclusively can be risky for your total portfolio.

Wise Words from Warren’s Wife: Don’t get too attached to the outcome
People have been trying to follow Warren Buffett’s investing advice for years but maybe his wife’s advice can also be helpful. 

A Stock, Like Love, Thrives on Romance and Dies on Statistics
If the RP line falters over a period of weeks, you’ll know the romance has ended.

Markets Are Never Wrong; Opinions Are
A rewarding strategy is to identify the current trend and stay with it as long as it persists.

Run, Sheep, Run
By watching investor sentiment and adjusting your investments accordingly, your investment results are sure to improve.