Talking stocks, trading, and investing in general

[idfnl]



I'm 34, invest in 5 index ETF's, all stock as I need to build up a pot of "**** You Money" for early retirement. 5% of my portfolio is for trading purposes. Started investing 2 years ago, started with picking stock, then switched into index investing in 2013.

I don't see how you can prevent people cherry pick their data to bury their loses, except perhaps to publish their annualized/YTD returns.

At your age, I'd adjust 20% of your portfolio for trading/speculative purposes. It would require your time, otherwise don't.

Cherry picking diminishes the more data points you have. It's one reason I trade such a large body of stocks. When my stuff isn't moving with the market trend, I'm out of sync, and I have data to show it. Then I have to decide if my conviction is strong enough to think its a blip, or whether it's time to shift. I was out of sync 6 or 8 months ago, but I held to my conviction that this was a momentum market and biotech was leading the way. I believe I was right, maintain, and have added to my conviction. It's coming to roost with RHHBY's recent acquisition. I think there will be as widespread acquisition spree of young biotech names and I intend to be there for at least 1 or 2 hits.

 

[Piobaire]



Because they exemplify situations. When you see enough of them patterns emerge, or you have a body of personal experience and/or hear/read enough stories of investment mistakes and start to listen to others, you don't repeat them (like margin ). Otherwise, you invest with a thumb up your ass. Would you like me to name 30 more like CSCO and ORCL?

Name me 30 more on a prospective basis as of today. Anyone can show 30 retrospectively.

 

[norcaltransplant]



My career offers me a modestly adequate salary and I am something of an expert in my field. It's difficult to be an expert in one field let alone more than one field. The thought I could be an expert in investments is almost ludicrous.

Now, one can be intelligently informed in several things. I like to think I'm intelligently informed in investments and part of this is knowing my limitations. Just like my career, if I can steward modestly successful returns, coupled with continuous capital additions from the career where I actually am somewhat expert, I should achieve long term success.

Big swinging investment dick? Not me. It's not my career, I don't feign expertise, and mainly buy and hold is what I'm all about.

This is pretty much my own experience on a Smalltimer scale. I tilt my 403b to fixed income for tax purposes and hold index funds in my taxable portfolios. I got in a bit late to catch the big upswing after 08/09, but I consider myself in decent shape... until I get married and/or have kids.

EDIT: Pio did you ever contribute to a Backdoor IRA? I remember you asked a few years ago.

 

[Piobaire]



EDIT: Pio did you ever contribute to a Backdoor IRA? I remember you asked a few years ago.

No. The whole prorated distribution thing. Way too little gain in the future for an increased tax bill in the present.

 

[amerikajinda]

Anybody else jump on the Betterment and WiseBanyan bandwagons with me?

I like putting chunks of money on auto-pilot...

Betterment is even tax-loss harvesting for me!

I chose the most aggressive risk levels -- this is what Betterment has me in:

Invest it and forget it! Profit later.

 

[guyver00]



At your age, I'd adjust 20% of your portfolio for trading/speculative purposes. It would require your time, otherwise don't.

Yes, I thought about that, using 20% for speculative plays. But I know my temperament, and it makes me anxious and self-doubting whenever I sell my holdings. The worst thing to happen is the stock I sold shoots up, while the newly bought ones just do nothing. So many times I had to myself for trading. I find that passive indexing gets rid of that anxiety in me, and helps me stay the course.

Of course, that 5% speculative play is just for my inner-hunter ego's indulgence.

 

[UnFacconable]



No. The whole prorated distribution thing. Way too little gain in the future for an increased tax bill in the present.

Just rolled my de minimis trad IRA into a roth at Vanguard. My wife is IRA-free, so we're going to dive in with both barrels. Wish I had known about it a few years ago as it would have been preferable to throwing the same sliver of extra income into taxable accounts.

 

[Piobaire]



Just rolled my de minimis trad IRA into a roth at Vanguard. My wife is IRA-free, so we're going to dive in with both barrels. Wish I had known about it a few years ago as it would have been preferable to throwing the same sliver of extra income into taxable accounts.

Yeah, works great if you don't have a material IRA pool prior to getting put into the post-tax situation.

 

[idfnl]



Yes, I thought about that, using 20% for speculative plays. But I know my temperament, and it makes me anxious and self-doubting whenever I sell my holdings. The worst thing to happen is the stock I sold shoots up, while the newly bought ones just do nothing. So many times I had to myself for trading. I find that passive indexing gets rid of that anxiety in me, and helps me stay the course.

Of course, that 5% speculative play is just for my inner-hunter ego's indulgence.

Your acceptance and understanding of your trading temperament is a positive trait. You're doing yourself a good service accepting and understanding your baseline.

Your fear is a bit of a red herring because some stocks you sell are inevitably going to go up, you're going to miss moves. You're also going to wipe your brow when your timing is right. It evens out with enough data points. Mistakes improve your trading, I don't look at bad moves as a mistake, it's a chance to do better next round.

An example of a stock with momentum that went up after my sell that I'm glad I'm out of is GPRO. I bought, was up, tripled down before earnings, it dove, I waited for it to retrace upwards, and as soon as I was up 1%, I sold it. I broke out to new highs, missed 6% more gains, but don't have a second thought... there are just too many video stories out there for this one to be a winner. If GPRO went up another 30% I'd still not regret the move.

DDD is another story I got out of for the same reason, short term it went up like crazy, but today it's well below my entry point.

 

[Master-Classter]

So I know RDPD is a little dated and I don't follow it to the letter, but after having read it a few times, basically I pulled out a few useful pieces of advice (I think).

Work hard, but first work smart. Don't be a lazy thinker. Think and have a strategy.

It's better to be an owner than a worker. Don't work for someone else unless it's strategic to learn and go start your own business. Working for someone else (unless you're in commissioned sales) or even being a professional will only take you so far.

It's not just about how much you make but how much you keep (be tax efficient) - I'm constantly looking for cash sources of income.

Real Estate is (not easy, but doable) one of the best ways to make a lot of money - currently finishing my RE license (class starts tomorrow!, finish next month)

No risk no reward. Buy safe 'investments' and you'll get 'safe' returns. Now don't throw money into things you don't understand, but take calculated risks to get real returns instead of just keeping up with inflation. Learn by doing. Study 100 stocks or deals to pick 2-3. And if those 2-3 deals don't happen, find another 100 to analyze instead of picking deal #3-5. See above point about being a lazy thinker.

Think about how you're spending your money. Are you buying stuff that keeps costing you more money, or things that can make you money? - example I'm trying to sell off a lot of my random junk 'assets', even including clothing because the maintenance costs are just a drain, while looking for items that I can use to make me more money, like my college textbooks (instead of selling them once, I tutor for cash on the side so they've made me big returns).

etc... anyway, it's not a perfect book, but I've got a few good insights from it. And I'm young and impressionable. I'm no rereading The Wealthy Barber, mostly because it's somewhat Canadian focused. It's still pretty dated though.

Oh and I know it's so simple and dumb, but I really love The Richest Man in Babylon.



(am I like some naive teenager reading their first get rich quick books or does any of the above make any sense? I feel like there's really only a few major golden rules and all of the classic books more or less cover the big points with some additions)

 

[guyver00]

@idfnl The most important thing about trading is to keep emotions in check. For me, I just hate the thought of losing out on any big gains because I sold at an inopportune time. In the back of my head, I always question "Did I just sell a future Google/Microsoft/Bershire Hathaway/etc?" It rears its ugly head again on Friday, when I sold my TWTR to buy SWHC, I hesitated for a good 5 minutes before I complete the sell order. I reassured myself that SWHC is a company with strong moat with good P/E ratio of 8, and that it'll still be around for another 10-15 years. Not so sure about TWTR though, yet I still ask myself the same question.

I think the takeaway for me is at least I'm aware of my emotions and temperaments, and that should prevent me from losing big money in the stock market. I'm too busy during the work day to have stocks as a distraction, or monitor the price every 5 min; indexing 95% of my portfolio helps. When I have new money coming in, I might re-initiate a position in TWTR again.

@Master-Classter Most of RDPD's teaching is almost common sense: live below your mean, be frugal, invest in appreciating assets, get rid of unproductive debts, and etc. His preaching in RE might have worked 5-10 years ago, but you should also realized that the RE bull is partly due to the slowly decreasing interest rate. Also, people have changed the meaning of "affordable" from, "Can I save the 25% down payment" to "Can I afford the monthly carrying cost, total interest paid be damn."

What I want to say is, you living in Big Smoke should see first hand, how many condos are being built, and how many more units will be available in the next few years. As supplies exceeds demands, RE's price will come down. Also, demographically speaking, more Boomers will retire in the next few years, and will likely sell their suburban McMansion to someone like you or me so they can cash in their retirement nest eggs. You have to ask yourself "How many of my peers can truly afford those outrageous price, without committing financial suicide?"

I think you're on the right track to get certificated in profession, but perhaps RE isn't the easy road to riches like the stars on HGTV portrayed to be. If you're realistic, and have patience to grind through days/weeks with no sales, and enjoy the "eat what you killed" mentality of RE agents, then it's great.

About studying deals/stocks and only pick your top 3 candidates, it sounds fine on paper. "Moving on," you yell, and onto another 100 deals/stocks for you to narrow down. But what about your thought or selection process, it could be flawed to begin with. And even if you think you've found a great bargain in a deal/stock, you have to realized that the person selling it to you will have a completely opposite view than yours, if not then he should have kept the deals/stocks to himself. When I buy an individual stock, I always remind myself that the person selling them to me is a supercomputer from Goldman Sachs, JPM or Citi.

As for books for a finance virgin, I highly recommend "Random Walk Down Wall Street" by Burton Malkiel.

 

[amerikajinda]



So I know RDPD is a little dated and I don't follow it to the letter, but after having read it a few times, basically I pulled out a few useful pieces of advice (I think).

Work hard, but first work smart. Don't be a lazy thinker. Think and have a strategy.

It's better to be an owner than a worker. Don't work for someone else unless it's strategic to learn and go start your own business. Working for someone else (unless you're in commissioned sales) or even being a professional will only take you so far.

It's not just about how much you make but how much you keep (be tax efficient) - I'm constantly looking for cash sources of income.

Real Estate is (not easy, but doable) one of the best ways to make a lot of money - currently finishing my RE license (class starts tomorrow!, finish next month)

No risk no reward. Buy safe 'investments' and you'll get 'safe' returns. Now don't throw money into things you don't understand, but take calculated risks to get real returns instead of just keeping up with inflation. Learn by doing. Study 100 stocks or deals to pick 2-3. And if those 2-3 deals don't happen, find another 100 to analyze instead of picking deal #3-5. See above point about being a lazy thinker.

Think about how you're spending your money. Are you buying stuff that keeps costing you more money, or things that can make you money? - example I'm trying to sell off a lot of my random junk 'assets', even including clothing because the maintenance costs are just a drain, while looking for items that I can use to make me more money, like my college textbooks (instead of selling them once, I tutor for cash on the side so they've made me big returns).

etc... anyway, it's not a perfect book, but I've got a few good insights from it. And I'm young and impressionable. I'm no rereading The Wealthy Barber, mostly because it's somewhat Canadian focused. It's still pretty dated though.

Oh and I know it's so simple and dumb, but I really love The Richest Man in Babylon.



(am I like some naive teenager reading their first get rich quick books or does any of the above make any sense? I feel like there's really only a few major golden rules and all of the classic books more or less cover the big points with some additions)

haha I have one of Robert Kiyosaki's books... the one that he co-authored with Donald Trump titled, "Why We Want You To Be Rich" (fourth from top in pic of my bookshelf below). Whatever you do, don't go to one of his "free" seminars (he won't even be there), and take everything you read with a grain of salt. But definitely read a variety of investment books and magazines like Kiplinger's and Money, etc. and of course keep up with the WSJ and FT, etc.

Some of my investment books:

Admittedly, not the greatest selection, but... like you I pulled out a few useful pieces of advice from each.

Here are some other books to consider:

http://money.usnews.com/money/perso...nds/slideshows/10-books-investors-should-read

http://investing.covestor.com/2014/08/10-investing-personal-finance-books-reading-summer

https://www.mint.com/blog/planning/...e-books-of-all-time-according-to-amazon-0314/

 

[idfnl]



Think about how you're spending your money. Are you buying stuff that keeps costing you more money, or things that can make you money? - example I'm trying to sell off a lot of my random junk 'assets', even including clothing because the maintenance costs are just a drain, while looking for items that I can use to make me more money, like my college textbooks (instead of selling them once, I tutor for cash on the side so they've made me big returns).

This is one reason I buy antiques. Modern furniture is pretty valueless when it comes time to change. I mix some modern stuff but in general I like antiques, and they happen to generally be an appreciating asset.

People don't put enough thought into the sink holes they get into with carry costs of their property... and especially the time involved in upkeep. For example, you may love black cars, but you'll need to wash it more often.

@idfnl The most important thing about trading is to keep emotions in check. For me, I just hate the thought of losing out on any big gains because I sold at an inopportune time. In the back of my head, I always question "Did I just sell a future Google/Microsoft/Bershire Hathaway/etc?" It rears its ugly head again on Friday, when I sold my TWTR to buy SWHC, I hesitated for a good 5 minutes before I complete the sell order. I reassured myself that SWHC is a company with strong moat with good P/E ratio of 8, and that it'll still be around for another 10-15 years. Not so sure about TWTR though, yet I still ask myself the same question.

And even if you think you've found a great bargain in a deal/stock, you have to realized that the person selling it to you will have a completely opposite view than yours

Most important thing about trading for me is having cash available. No money, no trading.

TWTR is a dog, I can't wait to sell it. I'm trapped at $59, and I have so little conviction that I didn't bother to average down when it was in the 30s.

I mostly disagree with this idea of what's on the other end of your trade is a completely opposite view. There are many reasons a share is available for sale. Just because you sell doesn't mean you are bearish, you may be selling to pay taxes, a liquidation of an estate, a divorce, a day trade, a fund rebalancing, profit taking, an option exercise, HFT machines, a stop loss. None of these indicate a lack of conviction, just circumstances.

 

[Concordia]



Just rolled my de minimis trad IRA into a roth at Vanguard. My wife is IRA-free, so we're going to dive in with both barrels. Wish I had known about it a few years ago as it would have been preferable to throwing the same sliver of extra income into taxable accounts.

When I left my job, I rolled my 401(k) into a Roth IRA. There was a tax hit to pay then, but (a) I'll never have to pull money out in my lifetime, and (b) it will be tax free for my children's-- or grandchildren's-- lifetimes. It's also a place to think about parking some of the more tax-inefficient alternatives, not that it wouldn't have that benefit if you went to a normal IRA.

 

[idfnl]



When I left my job, I rolled my 401(k) into a Roth IRA. There was a tax hit to pay then, but (a) I'll never have to pull money out in my lifetime, and (b) it will be tax free for my children's-- or grandchildren's-- lifetimes. It's also a place to think about parking some of the more tax-inefficient alternatives, not that it wouldn't have that benefit if you went to a normal IRA.

What was the tax hit? Is it flat or based on income or the amount transferred?