losing money in stocks

[LivingAlmostLarge]

I need advice about how to approach my DH on his hobby. I've allowed him to play the stock market with our roth IRAs. It seems to give him pleasure and i don't say anything. But we haven't been making any money in our ROth IRAs and appear to be losing money, ie our contributions. His 401k has been doing solidly. Very well.

I just want to invest and leave it alone. What can I do? This gives him a lot of pleasure and he loves telling me about his "wins" but I think he's not winning. sigh.

[humandraydel]

Can you reduce the amount that he can "play" with? Why not just give him $2-5k to invest as he pleases. While you are at it, make a deal with him that if he loses that money, he gets no more. Also, can you get your statements for the last 1-2 years and compare rate of return from the Roth to the 401k? Maybe if he sees that he is losing money it will help.

[yellow heel]

Can you just show him his "stats"? This should probably wake him up.

[Mr Nice Guy]

On the contrary, no one will be perfect at something they are new to doing. Surely your husband knows his losses, but is too proud to say it. The road to becoming a great investor includes losing money. If you want your portfolio to be managed non-professionally, then this might be something that is un avoidable.

Just tell hubby to be honest with you about it

[snafu]

Please remember the stock market does illogical, roller-coaster runs. It had been recovering nicely from the horror of 2008 - 2009 but now the Quake in Japan and the unknown outcomes in Libya/Yemen possibly Iran will shake it all out again.

I don't think professional managers had much success in the earlier shake-down...depending on how aggressive a portfolio a client's holds. You and husband need to discuss your risk tolerance. What do you need to be able to sleep at night without worrying

[disneysteve]

I would agree on an amount for him to trade with. 5-10% of your portfolio is a reasonable limit.

[dczech09]

Yes pose a limit. Someone mentioned earlier that this may be unavoidable for him to gain the skills of a successful investor. On the contrary, the most successful investors have very basic buy and hold strategies: Warren Buffett for instance made most of his money by knowing not to leave the market during hard times.

Trading in a IRA is no different than day trading. Actively trading stocks is gambling; if you are ok with gambling then impose a 5% to 10% limit (no more than 10%). Very few people ever make money trading stocks.

As for the infomercial people selling stock trading systems, these guys are not making money by trading. If they were, they would not be selling their secrets; they would be profitin off of them.

[disneysteve]

Originally Posted by dczech09

Trading in a IRA is no different than day trading. Actively trading stocks is gambling

I think there is a difference between day trading and short term investing. If I buy 10,000 shares of stock at 9:05 and sell it for a .10/share profit at 9:15, that's day trading. However, if I buy 500 shares tomorrow and hold it for several weeks or a month or two and then sell, that isn't the same in my mind.

[ea1776]

He should plot monthly returns for his investing history against the S&P. If he is at least around that or better then I would say no problem. Otherwise maybe you could allocate 10% as speculative and let him "play" with that. Retirement money isn't the place for this IMHO though.

[snshijuptr]

Make sure when you go to compare his returns against the S&P 500 you include the fees you would have paid. Compare $5000 that he trades (after fees etc) with $5000 in an index fund (after expense ratio).

If he wants to keep trading, make a deal that he only gets to play with a small portion of your money and that he has to b educating himself. DH and I were interested in "investing" like your husband, but after educating ourselves I realized that we had no place trading stocks. We were best served at our age and net worth to invest in boring index funds.

Think of it this way, if he were into electronics, you wouldn't want his first project to be rewiring your house. He might ruin the electrical systems and kill himself. Instead he would start with a small electronics kit with a lot of directions.

[jteezie]

Depending on how heavily he trades, he is likely losing a ton of money on commissions. It will take a bit of research and analysis to see all those numbers because brokers like to hide them.

Also he probably is doing the nice ole- buy high, sell low method of investing. Tell him to not let his emotions and the market movements affect him (I know easier said than done). Usually if you respond to the market movement, you're already too late.

I think everyone makes these mistakes. I had my share. The key is to learn from them as early as possible.

[LivingAlmostLarge]

He's beaten the SP apparently but he doesn't do as well as our boring 401k. I don't know if I'll win the argument of 5-10%. Right now I've settled on 50%.

Fees are something like $5/trade. I haven't paid much attention in the past few years but I know that he's likely not doing as well as buying and holding. This is because of his mom. And yes it's a hobby.

I wonder if I can get him to go down to 25%? Would that be a reasonable compromise?

[Frugal]

This one's hard. I would just approach him and address your concerns honestly and see how it goes. I got rid of my 401-K, and ended up cashing it out, but my situation looks like it was different than your's.

[Hector]

Originally Posted by snshijuptr

Make sure when you go to compare his returns against the S&P 500 you include the fees you would have paid. Compare $5000 that he trades (after fees etc) with $5000 in an index fund (after expense ratio).

XIRR is a good function in Excel to use.

[Hector]

Originally Posted by LivingAlmostLarge

He's beaten the SP apparently but he doesn't do as well as our boring 401k. I don't know if I'll win the argument of 5-10%. Right now I've settled on 50%.

Fees are something like $5/trade. I haven't paid much attention in the past few years but I know that he's likely not doing as well as buying and holding. This is because of his mom. And yes it's a hobby.

I wonder if I can get him to go down to 25%? Would that be a reasonable compromise?

5-10% is not enough and discussion is about 25-50%! Are you serious?
If he is not doing worse than S&P index, he might know something that most people dont. I wont worry too much if my spouse loves trading and is not doing worse than S&P for years. If I am concerned, I will ask my spouse to let me deal with half of our portfolio.

And there is a serious problem if my spouse is doing worse than S&P and is not willing to listen.

I hope, these numbers are not after housing crises and your spouse is doing this for long time now.

[LivingAlmostLarge]

Forgot about the trade costs. I should ask him if he weighed that in. He basically being a wise &*$& showed me a excel spreadsheet with weighted average based on when we contributed. I was looking it over and it seemed okay but I forgot about the transaction costs.

Since 2006 I think.

[jpg7n16]

Since 2006, the S&P500 fell from between 1200-1300, down to 1200. So if the overall market lost money (with transaction costs), why do you expect his portion to return significantly over that?

Considering that your contributions would have likely been made during 2007 and 2008 - which were then between 1400-1600, and are now 1200 - you'd expect him to have lost a little.

You must have just gotten lucky with your 401k selection - or forgot that your contributions have inflated your 401k balance.



I don't know your husbands background with investments, so I don't know a range to tell him. Since it bothers you, I think 25% would be better than 50%. But if he's very experience and knowledgable about investments, I'd have no problem with 25%.

[tan fish]

Can you suggest that he trade outside of retirement shelters all together? I also like to trade stocks, and like most people have had a fair share of nice wins and some spectacular losses, but I only trade stocks in a regular investment account. For my retirement accounts, I have it set on auto pilot with monthly deposits and purchases of mutual funds. The money I trade with is purely "play money" that I have after contributing to my retirement accounts. He should know that when it comes to retirement, its easiest and best to just play it long.

[TutoMoneta]

If a non-professional person trades stocks it's like a drug or casino.
Give him £500 monthly and send to casino (chances he will return with money back home are more or less similar).

[MonkeyMama]

You surely mean 50% of your ROTHs, or 50% of his ROTH??? Not 50% of your life savings or total retirement, right???

The 5-10% figure just applies to all savings, basically.

I think a good compromise is just to let him do what he wants with HIS ROTH. You do what you want with yours. Time will give you peace of mind, or ammunition if he is losing badly in comparison to yours.