Ask me anything

I’m a fan of Sam Harris’ “Waking up” podcast for his insight into science, logic , ethics and reason. He can be a bit controversial in some areas – but he’s not afraid to hit sensitive subjects head-on using a logical approach – whether that approach is painful or not. I don’t always agree with him, but I still like to hear his viewpoints and those of his guests.

I particularly like his “Ask me anything” podcasts where loyal fans write in and ask him a huge variety of questions. In the spirit of Sam’s podcasts I’d like to open the floor to my readers to “Ask me anything” on the subject of investing, risk management, portfolio management and technical analysis. You can even ask fundamental analysis questions, and I’ll get Craig Aucoin (resident CFA for ValueTrend) to inject his two cents worth.

You can ask as simple a question as you wish. But feel free to ask the hard stuff! I’ll do my best to get as many questions covered as I can. If this format proves popular, I’ll do it again in the future.


Please post your questions below and I’ll cover them on Mondays blog

To start the ball rolling, here are a few opening questions:


How many stocks should you own, and what percentage of each stock should you own?

Early in my career, I researched this subject in order to extract the best risk/reward ratio from the basket of stocks I would hold. I read studies by Ibbotson & Associates and others. These studies demonstrated the “sweet spot” for reducing risk while offering positive alpha (assuming you pick good stocks!) at 20-30 stocks. ValueTrend holds about 20 stocks in the equity platform when fully invested – and less when we go heavily into cash.

From there, you need to decide what amount of your capital goes into each stock. You can


    • Divide it up equally.
    • Allocate according to the volatility of the security.

We allocate according to  potential risk. Simply by noting the support levels below your buy point, and given that a stock will usually stop near those support levels, can give you downside projections. Looking at resistance (unless it’s an uptrend and at new highs), you can determine next-level targets for potential reward calculations. You can allocate smaller percentages of capital to the higher risk/reward positions, and more capital to lower risk positions. With 20 stocks, our median stock position is 5%. We will vary 2% outside of that per stock (3% for higher risk positions or 7% for lower risk positions). If it’s a sector ETF we can hold up to 10%. Create your own rules for your positions based on your risk/reward calculations.

If you like math, here is a research paper covering the “ideal” number of stocks on various markets.


How many time frames should I view?

Don’t just look at one time frame. We start at the weekly chart and then move to the daily chart. The indicators and trend will show you the mid and long termed diagnostics on those two timeframes. Sometimes we even look at the monthly charts—but that is more to get a big picture idea of the trends and cycles working behind the scenes. We trade off of the weekly and daily charts.


How many indicators should I use?

Use at least three indicators.

  • One technical indicator should help you confirm the trend. For example, using the 200-day moving average on the S&P 500 would have saved your bacon in all the recent bear market downturns—see the chart below (green line). I’ve also marked the 4 phases of the market – as discussed in past blogs and per my book Sideways.

Investment Analysis and Portfolio Management: an S&P500 chart with a trend, moneyflow, and momentum indicator.

  • Then apply a momentum indicator such as Rate of Change, RSI, MACD, etc. Use a momentum study to look for divergences or overbought/sold conditions.
  • Finally, I like using a moneyflow indicator such as the Accumulation/Distribution line or On Balance Volume to get a feel for the up day volume vs. down day volume. You want to know who is in charge (buyers or sellers).  I’d recommend you read my book Sideways to get a handle on where these indicators fit in.

By the way–Limit the number of indicators you use. Many traders get analysis to paralysis. They need so much confirmation from so many indicators that they can’t pull the trigger . Use indicators that work well together without duplicating each other.


That’s it for this “Ask me anything” introduction. Please post a reply with a question below with your questions.



  • The Nat Gas stocks are in the dump. Is there any hope of recovery of Nat Gas.
    I look forward for your blog every week. Thank you very much


    • Hi Keith and Paul,

      What is curious about natural gas stocks like PEY.TO and TOU.TO is that NatGas is holding 2.90 and yet the stocks are close to the lows of 2016.
      Even more weird, as WTI climbed above 50.00, oil stocks have been going down.

      Keith, have you seen this happened in the past?

  • Hi Keith,

    How should a novice investor build the initial investment account with not much capital, say no more than $50000? Invest all in a single stock or ETF? Or build a small portfolio of stocks? Take into the account that the objective of the investment account is preservation of capital for the long term.

  • Keith,

    Thank you for continuing to share your wisdom on this blog.

    As a follow up to Matt’s message above, my question has to do with junior to intermediate Canadian oil stocks like SPE and CJ. Despite good earnings, these stocks have been absolutely hammered beyond anything reasonable. I recognize WTI has dropped from it’s highs $55, but in the last month or so, despite a turnaround in WTI (now around 49.50 for a while) we’ve seen continued sell off’s. What’s driving this? Is there any hope for recovery?

  • Hi Keith
    Shall I short the SPY now until October and then go long up to next year spring?
    Thanks for your blog!

  • Hi Keith,

    My “ask anything” questions:
    1. When creating stop loss order(s) after a buy, how do you determine the appropriate stop price(s)?
    2. How do you establish a large position in a market representative ETF( eg. XIU, XSP)?

  • no question………just a huge thank you for coming up with interesting blogs each week……..

    • Thanks Bruce–and look for the “Ask me..” blog early next week with my answers to the questions posted.

  • Hi Keith,
    I very much appreciate your blog.
    My question is:
    – how does the Stochastic RSI differ from the RSI and would you use it?
    – what prices & when would you consider buying CMG [US] & CRH?

    • Wayne–too late for the Ask me Anything blog–its being published today.
      But this is easy–RSI is mid-termed, Stochastics is for neartermed signals. See my book Sideways for greater detail on how they are calculated and used efficiently.
      I’ll be happy to answer the stock questions on BNN–next show Wed. Sept 6th at 5:30pm

  • I have a relative that has stock options or RSU’s with the successful canadian company Shopify.
    Shopify has risen significantly over the past months and years.
    I have heard of many horror stories of an older generation who had options or RSU’s of Nortel, the company that could never fail….. but we know it did. Similar story for employees of the optical component supplier JDSU. And I know those same individuals who held onto their ownership until it was worthless or significantly depressed.
    So my question is what advice would you give my relative?
    Options I see include:
    1) Sit on those options for many years hoping Shopify is another Google or Amazon and contiune to rise in value or
    2) Sell 100% and take the capital and invest in a diversified portfolio or
    3) Sell a regular % (say 10%) on a regular basis (say every 3 months), and invest the smaller proceeds into a diversified portfolio.
    4) Keith’s option…..

    I can argue the merits of any of the 3, so whatever recommendation you provide, please provide a thorough justification so I can communicate your recommendation to my relative.


    • Daddyo–see my prior answer. I had a referral from a client to a man who held Nortel from a employee share plan. I told him (the referral) to pare some off, diversify, buy other stocks. He didn’t, It went up, and he told me he was glad he didn’t listen to me.
      Then it crashed. He’s now less glad about that decision to not follow my advice. He held to the bitter end.
      I will not hold more than 10% of my worth in any stock.
      ‘Nuff said.

  • A further thought on the shopify question.
    You may offer two recommendations:
    1) One may consider what a prudent employee of any company should do when they are granted options and this recommendation may be applicable to multiple readers of your blog and
    2) You may have a different recommendation considering this specific company and it’s inherent risks or upside opportunities.

    • Too late for the Ask Me Anything blog – but I tend to avoid piling into any stock –whether I worked there or not. No more than 10% in any stock–typically I prefer half of that. If you get stock options, convert and cash out periodically to avoid being over exposed. Just ask Valeant, Nortel etc etc employees.

  • I am putting a large sum of money aside for my daughter’s future wedding (say a 3 year horizon)(less than $25k).
    I can not afford for it to drop below the principal value being established as I am promising her at minimum this will be the amount we will contribute to your wedding budget.
    How would you invest that money?

  • Buy shipping containers …and lease them to a Container Leasing Company, who leases
    them to shipping companies. And sends you the profits. Sell your containers back to your
    leasing company any time after 4 years at cost price. i recently looked into this and they offer a guaranteed 12% return per yr. for long lease times and up to 24% for short lease times. they are based out of Australia and the UK. it is supposed to be written up in a contract . have you ever investigated the investment. it sounds and looks good but maybe to good to be true. appreciate your coments

  • Hi Keith,

    When investing in US securities, do you consider what the current CAD/USD exchange rate is before making the decision? Or do you have set aside a certain amount of USD to invest so FX rates aren’t much of a concern? Is there a cost efficient way to hedge the FX? I would like to start investing in US securities but do not want to take on the FX risks. What advice can you provide?



    • Hi Josh–too late for the Ask Me Anything blog–but i can answer that quickly. We do not hedge currency risk–and that hurts us when the loonie outperforms. We do reduce our exposure to the dollar, but its an expensive game to hedge. Horizons has an ETF worthy of exploration for that purpose. Basically, we do take a longer view at this time that the USD will outperform the loonie no matter what happens in the near term, so we grin and bear it when things like the recent 3 months happen.

  • Do we have a rising wedge on $SPX daily (3 year) chart? Is that benchmark closing below rising trendline support with bearish implication?

    Good Day

    • Hi JP
      Doesn’t look too much like a rising wedge to me–and I have little faith in the predictability of that pattern anyhow.
      S&P still in an uptrend–although I have been cautiously holding 35% cash based on seasonals and on sentiment studies


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