I used to work at a brokerage firm that shall remain nameless. In mid-March, as the end of the first quarter was approaching, it became clear that some of the salesmen weren’t going to make their numbers. I didn’t realize this until I overheard one broker call a client and tell her that it was time for her portfolio’s annual “spring cleaning”.
Images of Mennonites and butter came to mind. I was not impressed – spring cleaning? I’m sorry, but that is the work of an abject beginner! Not only can this ploy be used only once a year, but I can’t imagine any investor – even novices – falling for something that transparent. If you want people to take your story seriously, then your chicanery has to be more robust than that; you need to put an astrological spin on it.
People often look skyward for guidance, and are determined to see patterns and seek meaning in the arrangement of the planets and the stars. Even though we are just a single person living on a planet of almost seven billion, we like to feel that we are an important variable in this grand cosmological equation. Mr. Spring Cleaning – try using this script instead: “Good morning ________. Our firm’s head of research contacted me just now, and told me to give you a call. After consulting a number of star charts, and listening to Dark Side Of The Moon while drinking copious quantities of absinthe, our research department is in unanimous agreement – it’s time for your portfolio’s Atumnal Equinox Realignment.”
The idea of having one’s stock portfolio in alignment with the Earth, the planets and even the universe, got me thinking… I decided that it was now time to push the envelope of Portfolio Management, to break new ground and to develop an innovative and forward-thinking way of managing your investments. I would therefore like to present to you: Portfolio Feng Shui !
Before you can begin, I want you to forget everything you’ve heard and read about asset allocation, alphas, betas, risk tolerance, portfolio breadth and cyclical industries. I hate to break it to you, but you’ve probably wasted years of your life studying all that nonsense. I will now tell you what is truly important; here are the tenets of Portfolio Feng Shui:
Alphabetical Balance: Examine the names of the companies you buy – the first letters of their stock symbols should be spread evenly across the alphabet, and not bunched together. Disregard any advice you’ve received about grouping your investments across industries – this alphabetical continuity is more important, and is your first step toward creating a perfectly balanced portfolio.
Symbols Establish the Mood: Your portfolio should include shares in companies whose stock symbols begin with M and A because “Mmmmm” and “Aaahhh” are sounds that we make when we’re happy. Conversely, don’t buy shares in any companies whose symbols begin with F – when we’re unhappy, we tend to say words that begin with F. If you’re not convinced, then think of all the poor souls who invested in Fannie May (FNMA) and Freddie Mac (FMCC). Coincidence? You be the judge!
Furniture Placement: When you trade online at home, you must be facing the trading floor of the market you are using. For example, if you live in Cleveland, and you’re buying something listed on the NYSE, then your desk must face east. If later in the day you decide to buy some options or futures, then you must first turn your desk around so that it faces west, toward the Chicago Mercantile Exchange. Merely rotating your computer monitor and sitting temporarily at the other side of your desk is not sufficient – part of the strength of Portfolio Feng Shui lies in the arrangement of the furniture.
The Circle Of Life: Before making your first trade, you must first contemplate the beauty, symmetry and balance of the circle. Resist the urge to read any books on fundamental or technical analysis – watch The Lion King instead and familiarize yourself with film’s theme: “The circle of life”. This will put you in the right frame of mind.
How Much To Buy Is As Easy As Pi: In order to become a Portfolio Feng Shui Master Trader, you must first embrace the irrational. As you know, pi is an irrational number that approximates the ratio of a circle’s circumference to its diameter, and a rough estimation of its value is 3.1415926. Entrenched in history and popular culture, only the Golden Ratio (which we will ignore) has evoked a greater level of mystery, wonder or romanticism than pi.
Obviously, I’m not going to be satisfied with the beauty and perfection of pi – like Icarus himself, I’m going to reach even higher. The trading units of Portfolio Feng Shui are based on pi squared: 3.1415926 x 3.1415926 = 9.8696044. This enchanted number will serve as our board lot. Buy 987 shares of a company instead of 1,000; 9870 shares instead of 10,000; 98,696 shares instead of 100,000 etc. If you plan to buy mutual funds, then the number of units must be one of the following quantities: 9.869, 98.696, 986.960, 9869.604 etc. It doesn’t matter which mutual fund you buy, as long as the number of units match the pi squared numerical sequence.
Technology Stocks – A Special Case: Technology stocks are exempt from the pi squared purchasing rule. Shares in any computer-related company should be bought in the following quantities: 64, 128, 256, 512, 1024, 2048 etc. These numbers are all powers of two. Computer CPUs use binary numbers, and your holdings in these quantities will ensure that your portfolio will resonate with the billions of bits of computer data that are contained in the software being developed by these companies, thus keeping your holdings and the company itself locked in a “digital harmonic convergence”. This binary harmony will create a positive feedback loop which will (in theory) send its energy back to the programmers, and inspire them to write even more innovative software, which in turn will increase the company’s earnings and the value of its shares. It’s clearly a win-win situation.
Portfolio Feng Shui – it’s not about your annual returns… it’s about balance, harmony and ultimately, your sense of peace and tranquility. Now if you’ll excuse me, I need to prepare some material for my upcoming high-intensity serenity boot camp. In the meantime – happy trading!