Those of you who trade, do you ever stop?

[Fermion]

My little fun money trading account today hit 50% return for this year.

For the past 14 years I have averaged just over 30% compounded yearly return. I started the account with a bit less than $2,000 in a IRA and today it broke $80,000. I wish I had done it in a Roth...

One would think I have used up a few lifetimes of luck. Still, 14 years seems to be pretty good.

Part of me is leaning toward quitting while ahead. The little red guy on the other shoulder is saying why stop now.

Which one would you listen to?

 

[NYEXPAT]

The little red guy is a lot more fun. Now that I have turned 60, I find I do not listen to him anymore.

 

[W2R]

My little fun money trading account today hit 50% return for this year.

For the past 14 years I have averaged just over 30% compounded yearly return. I started the account with a bit less than $2,000 in a IRA and today it broke $80,000. I wish I had done it in a Roth...

One would think I have used up a few lifetimes of luck. Still, 14 years seems to be pretty good.

Part of me is leaning toward quitting while ahead. The little red guy on the other shoulder is saying why stop now.

Which one would you listen to?

This is the point at which many of us begin research on how to set up a conservative, income oriented portfolio. Some would put it all into Wellesley and Wellington.

Maybe keep about $10K aside from your main portfolio, to play with if you get tempted.... And if that is all you are talking about in your fun account, well, I'd say follow your gut instincts.

 

[ggbutcher]

I've occasionally thought about doing something similar, good show...

I'd move some of it out of the risk, keep going with a remaining balance you feel comfortable losing. You've shown a propensity to manage it prudently, doesn't make sense to give up the game, but it'd be a shame to lose it all to unforeseen-ness...

 

[gcgang]

I think you should set up your own investment firm and start charging 2 and 20.

 

[robnplunder]

My little fun money trading account today hit 50% return for this year.

For the past 14 years I have averaged just over 30% compounded yearly return. I started the account with a bit less than $2,000 in a IRA and today it broke $80,000. I wish I had done it in a Roth...

One would think I have used up a few lifetimes of luck. Still, 14 years seems to be pretty good.

Part of me is leaning toward quitting while ahead. The little red guy on the other shoulder is saying why stop now.

Which one would you listen to?

I have set aside $250k to "trade" when I RE. Realistically, I am hoping to beat the market, and generate a little bit of side income. But of late, I am just getting too lazy and may just put the $250k in the rest of my main portfolio.

 

[Fermion]

I've occasionally thought about doing something similar, good show...

I'd move some of it out of the risk, keep going with a remaining balance you feel comfortable losing. You've shown a propensity to manage it prudently, doesn't make sense to give up the game, but it'd be a shame to lose it all to unforeseen-ness...

I like this idea the best.

Would there be a good way to keep a large portion out of risk but available for trading?

Ok, that sounded weird. The problem I have had in this account is avoiding free ride rules (because it is an IRA cash account and no margin is allowed). What this means is that if I buy XYZ on Tuesday with funds from selling shares in ABC corp on Monday, I am not allowed to sell the XYZ shares until the ABC corp trade is settled. Thus if Wednesday morning XYZ jumps 80% I cannot take my profits.

If I dropped back to only trading $10,000 but kept $40,000 of cash in the account, then I could avoid these issues for the most part. There are two other problems.

1) Do I have the discipline to not touch the $40,000 if I see a sure thing (said sure thing being like last year when I saw GENC trading at $6.75 below cash on hand with positive earnings, now trading at $11).

and 2) Should I worry about trying to make any earnings on the $40K or just think of it as a very short term bond yielding 0%? I sometimes don't trade for weeks or months if there are no tasty treats available. It seems silly to leave $40K just sitting there...

 

[FIRE'd@51]

For the past 14 years I have averaged just over 30% compounded yearly return. I started the account with a bit less than $2,000 in a IRA and today it broke $80,000. I wish I had done it in a Roth...

Forget the Roth - if I were you I would be wishing I had committed 100% of my portfolio to this trading strategy

 

[LOL!]

Perhaps I should not respond, but I don't trade. I manage a portfolio instead. I make a few transactions every year and report them in the market timing thread. Transactions of less than $50,000 are annoying and not worth the trouble, so I rarely do anything with such a small amount.

So if you've been successful (>30% CAGR), why have you not stepped up to the plate and committed real money?

 

[splitwdw]

No, I do not stop trading on a "fun" account. This is money I can lose. It's not a great deal of money. My "fun" account is a straight trading account not an IRA.

If you are counting on this for retirement, move some into safer vehicle than stocks. You should always take profits and play with the "house" money.

 

[Fermion]

So if you've been successful (>30% CAGR), why have you not stepped up to the plate and committed real money?

Past performance is not a guarantee of future success.

Although for me the $80,000 is now real money. That is 2 years of living expenses.

 

[Theseus]

I did a lot of trading in past years, concentrating on high volume. Ran a spreadsheet that calculated my margins based on a penny per share pricing and based my trigger points calculated in that. It was exhilarating and scared me at the same time for just that reason. I learned a few lessons, overall I realized my making money at it was more dumb luck than anything else.

Work demand increased significantly about that time, so the trading hobby was sidelined while I began ramping up deferred income going to our 4nn(xyz) accounts. Biggest losers in the trading department were the orphan equities that grew stale and lost value when I didn't have the time to deal with them. Might do some trading after ER just to develop some short term gains so that I can use the orphan losses to offset; value is low enough it would be a very minor portion of current savings that would be "gambled." I never did get into going to the casino so that might be my entertainment

 

[Fermion]

Theseus:

I am not so sophisticated as all of that. I just buy things that look cheap and sell them if they become not as cheap in a short time.

Example recently is Gilead. I read about how they are first to market with a cure for Hep C. I looked at the stock price and noticed it was trading at $65, down from a recent high of $84 (I did notice that the stock was up some bazillion % over the past decade but I am too late for that). I bought at $65, a few weeks later the stock was $77 and I sold. I think it is over $81 now but I am out and looking for other stuff.

Like I said, very unsophisticated but it has worked for the past 14 years.

 

[aim-high]

Was talking with a friend of mine who day trades oil contracts. He makes $800 to $1300 a day on average. He's a scalper / day trader who trades on very short-term technical moves only.

He's not FIRE, but is able to make a living doing what he likes.

It doesn't sound like that's the type of trading you're talking about doing. I think when I'm FIRED, I'll take some fun money and try my hand at some short-term swings or momentum trades. We'll see.

 

[JacqJolie]

There's a couple of guys that post on another trading forum (value investing) I go on that are consistently generating >50% or so a year not counting 2008. If you follow their historical posts and trades, you can see that their results are real. One of them turned his IRA over to be managed by someone else and still value invests his taxable account. He's retired I think at ~35 or so? The other likes his day job (business valuation) but pretty sure he manages all of his own money.

I'm still trying to figure out my own strategy for this since I enjoy a bit of trading here and there too in my taxable account. Not doing as well as you! But we all have to start somewhere. I have been shorter-term trading (ie. not buy and holding but not trading to trade either) my son's RRSP and TFSA (like IRA and ROTH) as well and he's doing better than I am, but I only buy for him if things seem like no-brainer value to me or if I'm pretty sure there looks like there's going to be some M&A activity in O&G, and I don't shoot for dividends, diversification etc. like I mostly do in mine. He sits on cash a lot while I wait for opportunities. And if I don't succeed, I've promised him I'll match what he would have got from a more balanced portfolio.

I think that in this forum, value investing/individual stock selection like you or I are doing gets a bad rap. It makes far more sense to me than some kind of black box equity/bond allocation method. I've spent almost 30 years in accounting - valuing businesses, analyzing F/S's, producing annual reports... I hope I know what I'm doing and I enjoy the work behind it. If you're not willing to put in the time and effort though to do the due diligence, that's fine since it's a steep learning curve and some of us were lucky enough to get paid while learning it - and some of us (gasp!) actually enjoy doing the work. Many ways to skin a cat.

I read a really good book recently on people that manage their own money and have been doing very well:
Free Capital: How 12 private investors made millions in the stock market - Kindle edition by Guy Thomas. Business & Money Kindle eBooks @ Amazon.com.

 

[45th Birthday]

I don't trade, really, just do a bunch of option strategies taking advantage of the size of the portfolio and ability to take risk. I know I will eventually have to stop, but it will cost a nice chunk of income. Even with low volatility this year, so far I have netted $225K. Just started to get more active in the last year. Prior to that, income ran about $100-125K.

 

[NW-Bound]

If the activity makes money, and you are not increasing the stakes or taking higher risks, I do not see why you should stop.

 

[heeyy_joe]

I double dare 'ya to stop.

 

[Turboslacker]

I too find trading individual stocks fun. Nice returns for sure. Keep doing it exactly the same way you have been. The size of your trading acct should have no bearing on whether you keep trading or not. It's just extra $ that you didn't need to live on then nor now. If you still enjoy playing the game keep playin.


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[wingfooted]

I am trading a seven figure taxable account on the Interactive Brokers platform. I run it like a mini hedge fund - long, short, calls, puts, naked, covered, day trade, swing trade, margin, pair trades, et al. Working this year on improving tax strategies to minimize short term capital gains.

With improvements in mobile devices, it is possible to manage an account on virtually a 24/7 basis.

After a 45% run last year and another 32% YTD, I really should just go into cash or index funds. Frankly, having a hard time making that decision as the gains have significantly impacted net worth and opened up the possibility that with just a couple of more 'good' years - I might be truly classed as being rich (over $10MM net worth).


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[JacqJolie]

I am trading a seven figure taxable account on the Interactive Brokers platform. I run it like a mini hedge fund - long, short, calls, puts, naked, covered, day trade, swing trade, margin, pair trades, et al. Working this year on improving tax strategies to minimize short term capital gains.

With improvements in mobile devices, it is possible to manage an account on virtually a 24/7 basis.

After a 45% run last year and another 32% YTD, I really should just go into cash or index funds. Frankly, having a hard time making that decision as the gains have significantly impacted net worth and opened up the possibility that with just a couple of more 'good' years - I might be truly classed as being rich (over $10MM net worth).


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Can you expound on how you're doing this? I'm fairly lame in comparison at only 15% or so this YTD. Having said that, I am sitting on mostly cash right now in preparation to travel (offline) for the summer, so that sort of explains the anemic returns. I just find it truly fascinating on how people can beat the casino like this. Just gives me hope that I can too if I understand the system - more as an intellectual challenge than anything.

 

[youbet]

My little fun money trading account today hit 50% return for this year.

For the past 14 years I have averaged just over 30% compounded yearly return. I started the account with a bit less than $2,000 in a IRA and today it broke $80,000. I wish I had done it in a Roth...

One would think I have used up a few lifetimes of luck. Still, 14 years seems to be pretty good.

Part of me is leaning toward quitting while ahead. The little red guy on the other shoulder is saying why stop now.

Which one would you listen to?

Fermion,

I trade very similarly to you with a bit of fun money. It's very, very entertaining and educational. I'm inconsistent in regard to frequency, strategies and amounts. Like you, I do it within our IRA's (mainly mine but occasionally DW's) but in my case it's within Roth IRA's.

You don't need to do anything in terms of formal separation of fun money vs main portfolio money if you're only talking a few percent of your total worth. Just back off a bit on the amounts or the risk level you're trading if you feel like your "fun money" has turned into "needs money."

If you feel like you have a self-discipline problem (you can't stop yourself from being inappropriately speculative)then that's another matter.

BTW, by far my biggest loses are opportunity cost loses where I trade in and out or a stock or ETF a number of times making a bit each time. Eventually, it takes off after I sell and I never get back in meaning I didn't do as well as if I had just bought and held. This happened to me with AAPL years ago and investment club friends still give me sh*t about it.

I'm sitting now smiling from my recent good fortune with the jump up in SLV. Back to cash, I'm casually prowling for the next opportunity.

Have fun!

 

[Fermion]

Fermion,

I trade very similarly to you with a bit of fun money. It's very, very entertaining and educational. I'm inconsistent in regard to frequency, strategies and amounts. Like you, I do it within our IRA's (mainly mine but occasionally DW's) but in my case it's within Roth IRA's.

You don't need to do anything in terms of formal separation of fun money vs main portfolio money if you're only talking a few percent of your total worth. Just back off a bit on the amounts or the risk level you're trading if you feel like your "fun money" has turned into "needs money."

If you feel like you have a self-discipline problem (you can't stop yourself from being inappropriately speculative)then that's another matter.

BTW, by far my biggest loses are opportunity cost loses where I trade in and out or a stock or ETF a number of times making a bit each time. Eventually, it takes off after I sell and I never get back in meaning I didn't do as well as if I had just bought and held. This happened to me with AAPL years ago and investment club friends still give me sh*t about it.

I'm sitting now smiling from my recent good fortune with the jump up in SLV. Back to cash, I'm casually prowling for the next opportunity.

Have fun!

Youbet,

Yes we do sound like we have similar fun money account ideas. I envy that yours is in a Roth. It would have been so easy 14 years ago for me to convert this to a Roth (our income at that time would have allowed the conversion...of course now any income can convert but the taxes...oy!)

I have had some similar opportunity cost misses. Probably the biggest for me is Microsoft. I was playing around with it a few years ago when it was trading ridiculously low in the $24 to $28 range, writing closer dated calls against some Jan 2014 $25 LEAPS. I eventually had the 2014 $25 LEAPS paid for free and clear with the call premiums then stupidly sold them for a few dollars profit only to see MSFT climb well past $35 (now over $40). I still made like 70% overall profit on the deal but it could have been more like 300%.

 

[wingfooted]

Can you expound on how you're doing this? I'm fairly lame in comparison at only 15% or so this YTD. Having said that, I am sitting on mostly cash right now in preparation to travel (offline) for the summer, so that sort of explains the anemic returns. I just find it truly fascinating on how people can beat the casino like this. Just gives me hope that I can too if I understand the system - more as an intellectual challenge than anything.

15% return in a year that the SP500 is up 5% - that is great.

I has to be understood that the last 3 or 4 years have not been normal and the market has went straight up with nary a significant correction. Volatility, the stuff that causes investors sleepless nights, has been at record lows. Any hack can generate market beating returns by using leverage (margin debt or levered ETF's) under these conditions. Buying the dip and selling the rip has worked every, every time. Will this continue - no way. At some point the party ends, and as Warren says - 'you never know who has been swimming naked until the tide goes out'.

I love to buy into dips in special situations, examples POT last year when the Russian cartel announced they would break ranks on pricing, APC after the Tronox ruling or AAPL when it broke down under 400. Someone else has mentioned GILD when the biotech scare went off three months ago - yeah I made some money off that one too.

I also buy stock and write at the money calls, aiming for 2% or 3% option premium gains per month. Or alternatively writing out of the money naked puts on stocks I would like to own at lower price points.

I am sure most of us have had the experience of being at a hot blackjack or craps table, having a significant winning streak and then giving every chip back to the casino.

So the key point is managing your money and your self. Pulling back , or altogether out, at some favorable point. When does the music end - I really have no idea. My thoughts are that so many are looking for a correction that the most likely scenario is that this bull move has yet some time left.






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[Totoro]

Volatility, the stuff that causes investors sleepless nights, has been at record lows.

This investor actually loves volatility. Waiting for it to come back, patiently. Only in huge storms and waves can you find out who can sail.

Risk I don't like.

And curse the man who ever thought to equate risk with volatility. Should have given him a anti-nobel prize.