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64 - Rebalancing Kills Compounding show art 64 - Rebalancing Kills Compounding

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

Rebalancing is an often mentioned tactic utilized in modern portfolios but seldom is it examined from first principles. If you rebalance away from the compounding asset, then you will counteract the powerful effects of compound interest.

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63 - Your Portfolio should reflect your Investing Strategy show art 63 - Your Portfolio should reflect your Investing Strategy

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

Portfolio management is a critical means by which an investor implements their investing strategy. Align your portfolio and stock selection with your chosen strategy.

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62 - Passive Asset Allocation Strategy with Value Stock Geek show art 62 - Passive Asset Allocation Strategy with Value Stock Geek

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

In this episode, we discuss how to leverage the insights of value investing when building a passive asset allocation strategy. The portfolio and principles discussed focus on investing factors that improve performance over time.

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61 - How to leverage your equity portfolio without margin show art 61 - How to leverage your equity portfolio without margin

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

Over the long-term, you will maximize your investment returns if you can somehow use other people’s money to invest. Debt leverage allows you to access other people’s money for your personal benefit. Yet, margin debt is a bad idea.

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60 - Opportunities are Rare: Go the Extra Mile show art 60 - Opportunities are Rare: Go the Extra Mile

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

In this episode, I discuss how investors can sometimes fail by not seizing available opportunities. When an investment opportunity meets your requirements you should go the extra mile if needed to make the investment.

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59 - How to manage Currency Risk (Loss of Purchasing Power Parity) show art 59 - How to manage Currency Risk (Loss of Purchasing Power Parity)

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

One potential risk of earning an acceptable return is for your investment returns to be eroded by changes in the value of foreign currency. You can limit this risk by avoiding countries with large problems that may impact the currency.

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58 - Investing Goals for 2020 show art 58 - Investing Goals for 2020

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

The key to becoming a better investor is to focus on improving your investing process. In this episode, I discuss my 2020 Investing Goals.

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57 - Technical Analysis for Value Investors with David Keller show art 57 - Technical Analysis for Value Investors with David Keller

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

Technical analysis quantifies investor behavior. Value investors can leverage charts to improve their investing process. Behavioral Finance is also critical to reducing investing mistakes.

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56 - HemaCare 100-Bagger with Dan Schum show art 56 - HemaCare 100-Bagger with Dan Schum

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

In this episode, I interview Dan Schum of NoNameStocks.com

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55 - How to manage Inflation Risk (Loss of Purchasing Power) show art 55 - How to manage Inflation Risk (Loss of Purchasing Power)

The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management

In today's low inflation environment, one of your best opportunities is to find and invest in companies that will thrive when high inflation returns. When the rest of the market gets hammered, your investments would be safe.

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More Episodes

Mental Models discussed in this podcast:

  • Bias towards action
  • Liquidity
  • Mr. Market

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Show Outline

The full show notes for this episode are available at https://www.diyinvesting.org/Episode53

How to buy illiquid stocks

  • The purchasing of illiquid stocks presents some challenges. Your buying process needs to be focused on overcoming those challenges. The challenges are 3-fold:
    • Acquiring a full position size
    • Not pushing the stock price up too far
      • Too far is defined as beyond a purchase price that provides a sufficient margin of safety
    • Managing your personal impatience and bias towards action
  • Initial purchase attempt:
    • Ideally, you've studied how the stock price has traded in recent days. If the average daily trading volume exceeds your total position size, it's not an illiquid stock for you.
    • Use limit orders
    • If last trade is above my target price, set a limit buy order at your target price
    • If the last trade is below my target price, consider setting a limit buy order at the last trade price, but above the current bid. (if any)
  • Adjust your purchase price based on new information
    • Study changes in ask price and any executions that occur
    • More liquidity usually exists than is actually traded on an average day. You can take the whole volume if the price is right.
    • Offer up a large number of shares in a bid that doesn't actually move the stock price up. 

Summary:

Purchasing illiquid stocks is all about managing your relationship with Mr. Market. When you seek to acquire a full position you need to avoid pushing the stock price up too quickly. This can draw attention to the stock from competing investors. Meanwhile, you'll need to manage your personal impatience in order to successfully fill your position at a reasonable price.