When we introduced the project we’ve code-named “The AAII Way,” some AAII members asked us to include rules governing the addition and deletion of stocks. The challenge in providing specific rules is the varied manners in which individual investors trade. Laying out specific rules for a value-oriented, buy-and-hold strategy won’t necessarily be of use to a growth-oriented investor who is willing to trade more frequently.

There is a middle ground between giving specific rules and simply telling investors to write down what would prompt them to buy and sell. (Though we strongly believe every investor—be they an individual or institutional investor—should have written buy and sell rules.) The middle ground is to provide guidelines based on investing style. This will help each of you to formulate rules based on your preferences.

We’re going to start the conversation this week. The initial conversation will carry over until at least next week’s Investor Update. Hence, the “Part 1” in today’s title.

Before getting into specifics, there are broad characteristics of successful stock investing strategies for all types of investors—from the short-term chartists to those who seek to minimize turnover as much as possible. They include:

• Understanding why you bought a stock and what changes would cause you to sell it;

• A systematic and repeatable process for deciding what to buy and sell;

• Simple enough for you to fully understand and routinely follow;

• Cost effective;

• Reflective of your investing time horizon, allocation needs, desired turnover levels and tolerance for risk;

• Require only as much time as you are reasonably able and willing to devote;

• Written or typed rules that are easily accessible when you need to make a decision.

Bearish sentiment rebounded above 40%, where it has mostly stayed since mid-March. Plus, this week’s special question asked AAII members what they thought about second-quarter earnings. More about this week’s results.

Equity allocations rose to a six-month high in August.  More about the latest results.

The U.S. financial markets, and our “office” (we’re continuing to work remotely), will be closed on Monday in observance of Labor Day.

I will be moderating a discussion with Alpha Architect’s Jack Vogel on Wednesday at 7:30 p.m. CDT. Vogel will explain how to use a systematic process to identify high momentum stocks. Click here to register for this free digital event. 

Two members of the S&P 500 will report quarterly earnings next week: Oracle Corp. (ORCL) on Thursday and Kroger Co. (KR) on Friday. 

On Wednesday, the U.S. Labor Department will release the July JOLTS report. Thursday will feature the Bureau of Labor Statistics’ August producer price index (PPI). Lastly, on Friday, the Bureau of Labor Statistics will report the August consumer price index (CPI).

The U.S. Treasury will auction $50 billion of three-year notes on Tuesday, $35 billion of 10-year notes on Wednesday and $23 billion of 30-year bonds on Thursday.