@ miyatarama:
If my experience is just one anecdote to you, that's ok. Whatever certain opinions re: the near impossibility or Luck of successful investing may be, those opinions aren't going to stop me. I need to double my portfolio 1 more time (2 times would be Ideal) for basic FF, and I know that that's possible.
The number of stocks (10) fluctuates. It can be from 5-10. It usually depends on if I think the market is currently strong or weak, & where we are on the larger Bull/Bear Market cycle. Less conviction = fewer positions, and vice versa.
I've never yet had to engage a near total portfolio sell-off. (There are 2 times I should have.) It's just there as a "final option", a last resort emergency exit strategy (which is why I used the term, "seriously consider selling everything").
If I've sold because I've lost money in a position, I usually don't re-buy (except when I was day-trading oil). I'd rather look for a new opportunity (I don't mind doing research, I consider it extremely educational & necessary for my development).
I do keep short-term track of all sold-off positions to see how right/wrong I was about the Sell Time. I'm more right than wrong about a stock Selection going up (otherwise my portfolio wouldn't have done well), but more wrong than right about Timing the sell too early (my portfolio could've done much better than it did).
So yes, I've sold a stock and then watched it recover (I think that's inevitable for every trader/investor). For me, I'd say it happens 66-75% of the time. And it's often much more than just a 10% recovery or gain, which I would consider near break-even, a relatively successful Sell exit, and not worth quibbling about. More like a further 20, 30, 50, 100% lost gain (which is why I definitely know that it's possible to do better).
I don't kick myself (too much) about losing so much potential gain. I take comfort that I've already done OK, and that at least I was right about Selection. The reason why I don't just Hold everything is because 1) if I don't sell for a smaller loss, 25-33% of the time it does go much lower, and 2) if I don't sell for a gain, sometimes it goes back down near the buy price, or just stays there in a range, becoming non-working capital. So I do have to learn how to identify better when a stock is just "consolidating" or "topping out".) Right now, I'm just selling part or all of the gain.
I usually don't buy a stock unless it has significant upside potential; 10% is too small - I'm not a very short-term swing trader. I don't spend all my Time & Work researching & managing so that I can buy a stock at $20 and sell it at $22. I take a "position" because I think a given $20 stock has the potential to go to $30 or more. Those who watch the stock market, see this happen - and not rarely either. If I happen to sell at $22, it's because of the market, sector-stock news, etc.
CG-IT #2: Why I Think Funds Will Make You a Poor Investor
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Wolfpaws58
- Posts: 18
- Joined: Sun Apr 10, 2011 2:41 am
I noted the term "Marketed" several times as Mutual Funds were reffered to. BINGO! Mutual funds are a product like an annuity and the only entity in the equation that's guaranteed any income or profit is the fund management company.
That being said I realize that many people including myself have no option but to be in a limited number of mutual funds within a 401K. The process of selecting the available mutual funds usually goes something like this. 401K management company rep (who's out to maximize his profits) tells Human Resources Director (who knows nothing about investing) that this fund should be in the portfolio.
So far I have concluded that Mutual funds are products and not investments and the persons selecting them are about as qualified as I am to fly a passenger jet. I never went to flight school although I would have loved to.
Here's how I handle my 401K in simple steps from day 1.
1) I apply only what my company will match to generate my free money.
2) Everything (100%) is deposited into my cash fund that has a modest annual return.
3) I monitor every available Mutual Fund offering and over time establish a feel for how they perform in various market and geo-political conditions. I eliminate funds that duplicate other funds but perform sub-par. This reduces complication. It's a process that you get the hang of over time. Give every option available to you a chance and get to know them like your best friend. Then decide if your friend has been ripping you off over the years. (Hint, high fees are rarely worth it)
4) I establish a conservative target amount for each mutual fund and grdually transfer funds to these mutual funds when it looks like they are taking a hit AKA (buy low).
5) After I reach my target amount I sweep any profits from the mutual funds back into my near cash position (sell high).
6) I wait for the next hit that takes each fund below it's target (dollar amount) value and buy it back up to the target amount.
The essentials of investing are buying low, selling high and having a target expectation for each investment. The plan outlined above accomplishes all three. Once you get things rolling if you use software like Quicken to track your perfomance you will see positive results regardless of the of the market's direction. This is an absolute and guaranteed. You will not beat the markets becuase you're not trying to sell at the exact top or buy at the exact bottome because frankly that's not possible on a regular basis. You are in control of how much risk you are willing to take with your money because you set the targets based on your own risk tollerence. (Mine is admittedly very low)
This formula forces us to do what's right which is Buy low Sell High on a small scale. If you make it law, it completely takes the emotions out of the equation.
The frequency at which you monitor and react to overages and underages are personal. I look at my funds once a week or sometimes when I hear news that I know will present me with an opportunity to either buy or sweep profits.
This hit and run technique provides a stable means to go in and snatch profits when things are good and allows us to get basement sale procies when things are not so good. The net result is you always buy at some discount and sell at some profit which is in the end the reason we all invest. I don't try to beat the market I just want to make a profit as opposed to losing money.
One thing to consider when implementing this plan is that some funds do not allow you to buy for a period of time once you sell so you have to know your funds and the rules for each intimately.
After 30 plus years of managing my 401K I can honestly say that I am winning the game and playing with nothing but the houses money. The hit on my paycheck is neglegable and my real investments are in an after tax account and a ROTH IRA where I have absolute control.
Hope this makes sanse and helps a few people out. I want some people to hang out with when I retire in a couple of years in my mid-50s. So far most of the people I know will still be going to the office or the shop and punching the clock because they aren't that interested in managing their finances. Who knows maybe they're right and I'm wrong? Either way friendship isn't about money.
Enjoy!
That being said I realize that many people including myself have no option but to be in a limited number of mutual funds within a 401K. The process of selecting the available mutual funds usually goes something like this. 401K management company rep (who's out to maximize his profits) tells Human Resources Director (who knows nothing about investing) that this fund should be in the portfolio.
So far I have concluded that Mutual funds are products and not investments and the persons selecting them are about as qualified as I am to fly a passenger jet. I never went to flight school although I would have loved to.
Here's how I handle my 401K in simple steps from day 1.
1) I apply only what my company will match to generate my free money.
2) Everything (100%) is deposited into my cash fund that has a modest annual return.
3) I monitor every available Mutual Fund offering and over time establish a feel for how they perform in various market and geo-political conditions. I eliminate funds that duplicate other funds but perform sub-par. This reduces complication. It's a process that you get the hang of over time. Give every option available to you a chance and get to know them like your best friend. Then decide if your friend has been ripping you off over the years. (Hint, high fees are rarely worth it)
4) I establish a conservative target amount for each mutual fund and grdually transfer funds to these mutual funds when it looks like they are taking a hit AKA (buy low).
5) After I reach my target amount I sweep any profits from the mutual funds back into my near cash position (sell high).
6) I wait for the next hit that takes each fund below it's target (dollar amount) value and buy it back up to the target amount.
The essentials of investing are buying low, selling high and having a target expectation for each investment. The plan outlined above accomplishes all three. Once you get things rolling if you use software like Quicken to track your perfomance you will see positive results regardless of the of the market's direction. This is an absolute and guaranteed. You will not beat the markets becuase you're not trying to sell at the exact top or buy at the exact bottome because frankly that's not possible on a regular basis. You are in control of how much risk you are willing to take with your money because you set the targets based on your own risk tollerence. (Mine is admittedly very low)
This formula forces us to do what's right which is Buy low Sell High on a small scale. If you make it law, it completely takes the emotions out of the equation.
The frequency at which you monitor and react to overages and underages are personal. I look at my funds once a week or sometimes when I hear news that I know will present me with an opportunity to either buy or sweep profits.
This hit and run technique provides a stable means to go in and snatch profits when things are good and allows us to get basement sale procies when things are not so good. The net result is you always buy at some discount and sell at some profit which is in the end the reason we all invest. I don't try to beat the market I just want to make a profit as opposed to losing money.
One thing to consider when implementing this plan is that some funds do not allow you to buy for a period of time once you sell so you have to know your funds and the rules for each intimately.
After 30 plus years of managing my 401K I can honestly say that I am winning the game and playing with nothing but the houses money. The hit on my paycheck is neglegable and my real investments are in an after tax account and a ROTH IRA where I have absolute control.
Hope this makes sanse and helps a few people out. I want some people to hang out with when I retire in a couple of years in my mid-50s. So far most of the people I know will still be going to the office or the shop and punching the clock because they aren't that interested in managing their finances. Who knows maybe they're right and I'm wrong? Either way friendship isn't about money.
Enjoy!