Because of the choppy market these days, I've recently been investing somewhat differently than usual.

Ideally, I'd like to have lots of money invested in companies that I hope will offer prospective long-term returns of somewhere north of 20-25 percent per annum. I don't see any right now, but I hope that within the next two years we may see enough of a decline (or at least a sideways market while earnings rise) that I can get some money into great companies that are deeply undervalued.

But because I don't want to be sitting on huge, moderately undervalued long positions in this fragile market environment (with the exception of extremely financially secure companies like Berkshire Hathaway and Johnson & Johnson), I've been playing "smallball" instead. I've been taking gains of 10-20 percent on both the long and the short side when they present themselves and then reverting some position that approximates neutral.

I think of this strategy as hitting singles rather than home runs. I'd like to be Barry Bonds, but the market isn't offering that chance, so Ichiro will have to suffice. As far as I'm concerned, it's just not longball time right now. Just as a matter of probability, home runs are going to be much rarer in the fifth year of a bull market than they would be in, say, 2002.

This smallball strategy is very conservative, and has forced me to leave money on the table at points. For example, I was heavily short Countrywide Financial (CFC) and D.R. Horton (DHI) during the August breakdown, but covered them far too quickly.

Still, I think that the ability to remain liquid while seizing the occasional opportunity has made up for these lost profits. The whole idea is to maintain my capital in real terms so that when it's time to play longball again (read: prospective long-term annualized returns of 20% or greater), I will have enough money left in my pockets to play.