Investing Strategy

[jpg7n16]

I'll have to check that out. I'm paying $7/trade right now which makes it tougher to turn a quick profit on a small number of shares. Perhaps after I do my 2010 taxes and make my SEP-IRA contribution for the year, I'll move it over there.

$7 a trade on $800 is a terrible rake

[doxie]

Thanks for all the advice guys. I should have been more clear up front. The TSP is the government's equivalent of a 401K plan. It only has 5 funds, one that tracks the S&P 500 (C Fund), one that is all small cap stocks (S Fund), one that is all international stocks (I Fund), one that is all bonds (F Fund), and one that is government securities (G Fund).

So what I see people doing to speculate or beat the markets is one month they will move all their money into the S fund say, then another month move it all to G (which is basically like having it in cash). Some people are making tons of money that way. The truth is, these are all just government schmoes like me, not professional traders. I don't think I have the stomach to watch my entire portfolio drop 30% in a month.

Disneysteve, I like what you said, and I forgot that I had sort of taken this approach before. I opened up an Etrade account last year for the purpose of dabbling a bit. I bought 2 shares of Apple stock, and have done nothing since. Well, I've made $150 or so, so that's not bad

But I think I could take that same approach with my TSP. If I feel the need to ride some trend, I could take a small amount of money from G Fund or F Fund and move it into the stock funds. Or I could leave that alone and do something on Etrade. I also have a Vanguard Roth IRA. Right now that money is in a targeted retirement (2030) fund. If I want to get creative I could play with that, as that is a very small amount of money right now compared to my TSP.

By the way, I'm not really a gambler, it stresses me out too much. You should have seen me kicking myself the other day because I chose the wrong player in my fantasy football game and only won $50 instead of $100. Imagine if that were my entire retirement savings that I chose incorrectly with .

It's slow at work this week, and that's when I start getting myself into trouble. Thanks for talking me down!

[KTP]

$7 a trade on $800 is a terrible rake

I agree, and he is actually paying $14 for a full in/out trade. This is why I am having so much fun at optionshouse (no, I do not have any affiliation with them ). There are some extremely fun little plays you can do when you have free options or stock trading both ways. For instance, today I bought just 4 ccntracts for Feb 18, 2011 microsoft $31 calls for only $0.12 per share! With zero commission, my total outlay was $48, and I now control 400 shares of Microsoft all the way through January earnings. My entire downside risk is $48, and the upside if Microsoft breaks $32 is over a 1000% gain (assuming a bit of time premium is left on the option as well as the intrinsic vallue). Even a 20% chance of Microsoft hitting this figure by Feb 18 is a far far better gamble than any table in Vegas. If you didn't have the free trades on both buy and sell though, buying an option this far out of the money would be swamped by trading costs.

Ok, enough rambling.

[Snodog]

The game changes A LOT when you switch from play money to real money because both you and the other players play differently. With play money, people will make bets and take chances that they would never do with real money. A lot of people get misled by that. They play for play money, do great and think they are experts. Then they move to real money games and get clobbered. I play a play money poker game online. I started with $10,000 dollars a couple of years ago and now have over $1.8 million. If I had reason to believe that I could actually enjoy that kind of success in real life, you can be damn sure I'd quit my job and head to the casino but I know it just doesn't work that way.

Yeah the play is tighter with real money and you have to take advantage of that by playing looser. When you play with play money you just need to play ABC poker - when you have a hand bet strong and when you don't fold. Bluffing is rarely a good idea except for late in the tournament. I started with $1000 and worked my way up to over 5 million. When I played with real money I did well buy not quite THAT WELL. Now of course I play only tournaments and no cash games.

[Scanner]

yeah, we have the "buy and hold" pro and con discussion here for awhile.

I think a moderate compromise can be met with what DisneySteve suggested.

I think the error many investors (vs. traders) make is they forget to speculate and speculation, whether it's 5-10 or maybe 15% of your portfolio is important. Yeah, you may lose 5K here or there, then lose another 5K. . .but then bam! make 20K. I think one study noted that over time, your "speculations" will account for as much as 50% of your gains/earnings over the lifetime of your investments. That's not to say the bonds and indexes we all invest in weren't important either over a lifetime, but the speculations were just as important.

To me, I like the diet analogy - the sugar, salt and fat, while it shouldn't be the staple of your diet is important to give your life some flavor.

That's why we always remember them - the successes and losses vs. the boring Indexes we all invest in.

You talk to any investor (or trader) and they'll say, "Yeah, I remember XYZ ticker symbol. I put 5K in that in 2006 and in 2008 I had it up to 20K!!!!!" Traders don't even think of themselves as "vested owners" in the company. . .they just look to find another seller to make a profit.

Of course, you speculate like an "investor" or speculate like a trader (interested in the market and sensitive to the market). I am still trying to appreciate the fine nuance between being an "owner" in a microcap company and how I will "trade it".

[krantcents]

So I've had internal struggles over the past couple of years about how to manage my retirement investments. My primary investment right now is in the TSP. My struggle is that I get caught up in reading these websites where people discuss trading strategies, and the sentiment is very anti "buy and hold." There are all kinds of systems people follow, some of them are free, some of them are paid subscription services. I've been tempted several times to test out following some of them, but I end up getting scared before taking the plunge. Most of them seem to involve having all of your money in one or two funds at any given time, which just seems risky and drastic to me.

Anyway, I guess I'm just trying to figure out how to be okay with a more conservative buy and hold strategy, perhaps making minor adjustments here and there. Perhaps someone can recommend a personal finance or investment book? I need something to fall back on when I start getting these temptations to do something crazy.

By the way, I've done ok with whatever I've been doing. -34% in 2008, +30% in 2009, +12% this year. I was only 2 years into my career in 08, so in reality I didn't lose that much money.

Thanks for listening to my ramblings.

Buy and hold strategy can work if you have a diversified portfolio. Recognize some part of your portfolio will be affected more than others. As long as your returns are reasonable and you are satified, that's what counts. In the end you have to be able to sleep at night.

[KTP]

I agree, and he is actually paying $14 for a full in/out trade. This is why I am having so much fun at optionshouse (no, I do not have any affiliation with them ). There are some extremely fun little plays you can do when you have free options or stock trading both ways. For instance, today I bought just 4 ccntracts for Feb 18, 2011 microsoft $31 calls for only $0.12 per share! With zero commission, my total outlay was $48, and I now control 400 shares of Microsoft all the way through January earnings. My entire downside risk is $48, and the upside if Microsoft breaks $32 is over a 1000% gain (assuming a bit of time premium is left on the option as well as the intrinsic vallue). Even a 20% chance of Microsoft hitting this figure by Feb 18 is a far far better gamble than any table in Vegas. If you didn't have the free trades on both buy and sell though, buying an option this far out of the money would be swamped by trading costs.

Ok, enough rambling.

DS, you really really have to get over to optionshouse for some legalized gambling with zero house rake (for the first 100 trades). Due to big gains today in MSFT, CSCO, and FRO, my little $3000 starter account is sitting at $5300 already! It is all in cash now except for 10 April $30 microsoft calls and I have to wait three days for it to settle before I can buy anything (maybe that isn't such a bad thing though...give me a breather). Trades used so far 23/100 in a little over two weeks since I opened it.