The Yin and Yang of Pitching (The Financial Athlete #22)

Yang is active. Yin is passive. Yin and yang must be in balance.

Pitching a baseball is yang. Resting the pitcher’s arm is yin. A pitcher must have balance with the yin and yang of pitching to maximize performance. Overuse and overload, which cause injuries, are forms of too much “yang”. Overuse is pitching too often. Overload is pitching too much in one outing. Without adequate recovery time (yin), pitchers lose control and velocity due to arm fatigue.

Novice investors tend to buy a stock all at once, leaving no cash behind. This style of investing is characterized by too much “yang”. Later, they often experience buyers’ remorse because the stock price declines. Rather than throw all your cash at once in chasing a stock, initially invest no more than 1/3 of your allocated funds for it. Then study how the company performs in the following quarter. Add to your position another 1/3 if a disconnect occurs between the stock price and a robust company performance, or if your expectations grow for earnings and cash flow. Once again study how the company performs in the following quarter. If you are still convinced the stock is selling below its intrinsic value, you can add your final 1/3 position. Do not add beyond your original allocation of funds, even if the stock price declines. Allocating an extremely high percentage of your portfolio suggests lack of self-control, another form of too much “yang”.

This system of gradual entries protects your downside. If later you become shocked to learn of deteriorating company performance, you may lose less.

“I never threw an illegal pitch. The trouble is, once in a while I would toss one that ain’t never been seen by this generation.” – Satchel Paige


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One Response to “The Yin and Yang of Pitching (The Financial Athlete #22)”

  1. Principles of Joseph Pilates (The Financial Athlete #130) « Pasta Man Vibration Says:

    […] more on flowing movement, see “Creating Space” #25 and “The Yin and Yang of Pitching” #22 and Beyond the Bottom Line #126 and “Be like Water” […]

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