This is why

[Gumby]

That bit a lot of investors in the butt during the Flash Crash of May 6, 2010. Stop losses were triggered, but the execution prices were well below that level due to the rapidity of the decline.

 

[pb4uski]

Yes, I realize that can happen that it executes significantly below the stop loss but those instances are rare and a risk of trying to ride a winner a bit longer... but it seems to me that the potential benefits exceed the risk.

 

[NW-Bound]

There's a stop-limit order, which turns into a limit order and not a market order, after the stop level is broken through.

I don't use any of these anymore. But then, I look at my stocks daily, except when I was traveling.

 

[Sniggle]

If you are a buy and hold type of person, and you are confident in the stock, then hold it until you need to liquidate (or your heirs do). If you have a 30% gain, and you are unsure if the stock can continue to rise, and you have a better investment, sell and move on. Neither is right or wrong, and either choice will sometimes result in regret and other times result in self satisfaction. (but no one should regret a 30% return in a year, or even a 15% return over a couple of years)

With the way the market has been lately, I often think to myself that if someone had on January 1 come to me and offered me 10% on my savings if I just let them sit in a savings account all year, I would take it in a heart beat.....and I would have missed on between 4-10% additional upside. But some year soon, 10% return for the year will be exceptional.

For me, I still need to grow my nest egg, and since I missed facebook, amazon, and netflix, I am trying to do it by grabbing 1-5% per month selling covered calls and grinding my way to the finish line.

 

[Koolau]

That would work too, and I have tried it, but I have not been attentive enough to do it well. That's why I have gradually sold off my individual stocks (I'm down to 2 names) and moved to mutual funds. Someone else can worry about it for me.

Besides the fact I'm no good at picking "good" stocks, the idea I have to "w*rk" to make money by actually keeping track of my stocks reminds me too much of pre-FIRE. Each to his own and I hope those managing their own stock portfolio make a fortune. I'm sure it's done every day.

 

[nash031]

Core portfolio: Index
Performance booster: about 5% (low six figures) dedicated to individual stocks and I typically do well (sitting on one 250% gain in 16mos and another couple that are up past the S&P 500).

I'll probably up that sometime soon as I have the time... but there's a difference between investing and trading; I doubt I will ever "trade".

 

[NW-Bound]

... the idea I have to "w*rk" to make money by actually keeping track of my stocks reminds me too much of pre-FIRE...

Yes, it's somewhat like work. But there's work that you enjoy, and there's work that you hate.

Pre-FIRE, I loved my work, and in fact often worked hard and long hours without pay outside of the office. My effort brought job satisfaction, but not monetary reward.

Now, I spent a couple of hours each day during trading hours, looking for opportunities to sell covered calls and puts. Last year, I made on the average more than $1200 each trading day, just from the option premium. This is separate from gain from the stocks. The pay per hour is far greater than I ever earned doing engineering work, even if it does not bring the same job satisfaction. It certainly did not involve office politics and other aggravations, as I work by myself and don't have to prove anything to anybody, nor have to justify anything other than to myself.

 

[NW-Bound]

Core portfolio: Index
Performance booster: about 5% (low six figures) dedicated to individual stocks and I typically do well (sitting on one 250% gain in 16mos and another couple that are up past the S&P 500).

I'll probably up that sometime soon as I have the time... but there's a difference between investing and trading; I doubt I will ever "trade".

My portfolio is currently 67% individual stocks (90 to 100 positions), 12% in MFs, and 21% in cash and cash equivalents.

I don't trade stocks, but sell options on them. And more than 90% of the options I sell expire worthless.

As mentioned earlier, my portfolio performance for the last 5 years roughly matched the S&P, but my stock AA is not 100%.

So, why don't I just put everything in the S&P and have the same performance? Well, we have had some very bullish years, and I think that when the market turns I will suffer less not being all in stocks. That will have to be proven when it happens, because my stocks are not representative of the index. Yes, there's risk in what I do.

 

[Time2]

We are truly in a blessed period the last 10 years for holding stocks!!

And that fact has skewed a lot of people's thinking about stock market investing. All we can hope is that the skewed thinking makes for continued money pouring into the market until I cut back on my AA!

 

[Koolau]

And that fact has skewed a lot of people's thinking about stock market investing. All we can hope is that the skewed thinking makes for continued money pouring into the market until I cut back on my AA!

Thanks for reminding me. My AA which has typically been about 30% equities has crept well above 35% of late. Time to rebalance!

 

[Koolau]

Yes, it's somewhat like work. But there's work that you enjoy, and there's work that you hate.

Pre-FIRE, I loved my work, and in fact often worked hard and long hours without pay outside of the office. My effort brought job satisfaction, but not monetary reward.

Now, I spent a couple of hours each day during trading hours, looking for opportunities to sell covered calls and puts. Last year, I made on the average more than $1200 each trading day, just from the option premium. This is separate from gain from the stocks. The pay per hour is far greater than I ever earned doing engineering work, even if it does not bring the same job satisfaction. It certainly did not involve office politics and other aggravations, as I work by myself and don't have to prove anything to anybody, nor have to justify anything other than to myself.

I completely understand. I recall periods of time w*rking 12 and 14 hour days at Megacorp, thinking and feeling as if I was making a difference. So I see nothing at all wrong with "w*rking" for yourself at something you love to do and are good at. It's just not for me. By almost any measure (any measure I would come up with) we have "enough", so I don't find it rewarding to manage my portfolio on a daily basis. That's what's wonderful about FIRE. We each get to choose what fulfills us and satisfies us. Enjoy!

 

[ERD50]

Thanks for reminding me. My AA which has typically been about 30% equities has crept well above 35% of late. Time to rebalance!

Your choice of course, but historically that low of an AA has been more prone to failures. Success rates drop off below 40/60 AA.

I prefer to stay away from the corners (history may not repeat itself, but it "rhymes"). I'm comfortable with some volatility, so I'm fine with 70~75 equities. I can understand someone wanting to be more conservative (or more aggressive), even down to 40/60, but below that seems to be counter-productive in terms of portfolio success.

-ERD50

 

[NW-Bound]

I completely understand. I recall periods of time w*rking 12 and 14 hour days at Megacorp, thinking and feeling as if I was making a difference. So I see nothing at all wrong with "w*rking" for yourself at something you love to do and are good at. It's just not for me. By almost any measure (any measure I would come up with) we have "enough", so I don't find it rewarding to manage my portfolio on a daily basis. That's what's wonderful about FIRE. We each get to choose what fulfills us and satisfies us. Enjoy!

I also have enough, not because I am that rich but because I always practice LBYM. My expenses for the last 12 months were 1.8% of investable assets, and that included cash for a new car. My WR is less than that, because my wife is already drawing her SS.

Last year I made a lot of money selling covered calls and puts, because we were stuck at home not traveling. I did not realize this, until I looked up with Quicken.

I do find it enjoyable to spend a couple of hours a day selling options. It still leaves me a lot of time to do home projects and yard work during the day, doing occasional cooking, and surfing the Web and watching Youtube videos at night. It's not just about making money, but also to see if I could figure out this crazy market. One way to get back at the crazy investors who drive the market nuts is to make money off them. Is it doable? I am trying to find out.

Yes, it's not for everyone, just like Wagyu beef is not for everyone. We saw imported Japanese Wagyu steak at Costco the other day ($99/lb). One look at that, and my wife said "Look at all that fat. No way!". But I still like to try that. How long would it take me to eat a package of 2 lbs? I pondered that, and did not buy.

But, but, it so happened that my daughter said she got some American Wagyu steaks, and will bring that up to our high-country home for the Labor Day family getaway. Alright! I will try that to see if I like it, before going for even higher fat content.


PS. Forgot to say, by going against the others' greed and fear, one also provides liquidity, and helps stabilize the market. It's an honorable endeavor, oui?

 

[Koolau]

Your choice of course, but historically that low of an AA has been more prone to failures. Success rates drop off below 40/60 AA.

I prefer to stay away from the corners (history may not repeat itself, but it "rhymes"). I'm comfortable with some volatility, so I'm fine with 70~75 equities. I can understand someone wanting to be more conservative (or more aggressive), even down to 40/60, but below that seems to be counter-productive in terms of portfolio success.

-ERD50

Thank you. I do recall that curve. I do understand your point and have considered the ramifications carefully. Had I entered FIRE with minimal funds, I'm sure I would have carried a higher equity position. I retired with much more than I had anticipated so feel no need to add to the stash - though I have been adding, thanks to Mr. Market and a relatively frugal life style. I think I'm at expenses to stash ratio of 40+ now (thank you, Social Security!) Also, my time horizon is getting shorter by the day (heh, heh, I guess that's true for all of us.) I now think in terms of 26 years of retirement remaining (no longer 30) and that gets us to 100.

My two (reasonably rational) fears are runaway inflation (not usually ameliorated by equities) and long-term, long-term-care - 10 years of LTC for both of us might be problematic. I have pretty good LTC insurance for both of us but agree that higher equity (especially in the past) would have been better insurance. Going forward, who is to say that equities will continue to be so generous - especially over a shortened time frame. During much of my accumulation phase, I was MUCH higher in equities (up to 80%).

What I have found is my risk tolerance is just about covered at 30+/-%. During the unpleasantness of 2008, etc., my PMs made up for virtually all my equities losses, so I never panicked and rarely even looked at my results other than quarterly. If all of this sounds like whistling past the graveyard or sticking my head in the sand, I guess I'm okay with it. I usually say YMMV and am willing to live by that here.

Thanks again.

 

[youbet]

I'm happy for the gains I got. No 'sellers remorse' for me, but still....

-ERD50

I'm a different cat I guess. I made some money on AAPL in the same time period you did and got out. And I have lots and lots of "sellers remorse!" Today is Tim Cook's tenth anniversary as CEO and, damn, Apple has made a lot of good decisions and a lot of money for investors over his tenure.

I also have some seller's remorse over selling my BRK/B.

 

[yakers]

Thanks for reminding me. My AA which has typically been about 30% equities has crept well above 35% of late. Time to rebalance!

End of '20 was 45/44/11(cash), probably 50 equities now. I would not mind something around 50/50, the problem is finding decent places for fixed income. I have a major portion of fixed income in the Federal TSP G fund, and bond parts of VG Wellesley, STAR and Balanced (VBIAX) in IRAs and Wellington in taxable. So I hope they can manage bonds better than I can. But fixed income is the challenge, recently been adding Prefereds and they are doing well but not sure how they could 'go bad' since I have not held them long.
So, have you found decent places to hold your fixed income?

 

[pb4uski]

Best place that I know of for fixed income today are investment grade preferreds .. just unsure how they will behave if/when interest rates rise... I'm crossing my fingers that it won't be too bad... besides I'm in them mostly for income anyway.

 

[Koolau]

End of '20 was 45/44/11(cash), probably 50 equities now. I would not mind something around 50/50, the problem is finding decent places for fixed income. I have a major portion of fixed income in the Federal TSP G fund, and bond parts of VG Wellesley, STAR and Balanced (VBIAX) in IRAs and Wellington in taxable. So I hope they can manage bonds better than I can. But fixed income is the challenge, recently been adding Prefereds and they are doing well but not sure how they could 'go bad' since I have not held them long.
So, have you found decent places to hold your fixed income?

I have a Guaranteed Income Fund within my old 401(k) which holds the biggest share of my fixed income. It hasn't been paying too well with such low bond rates of late. I expect that to change as interest rates begin to rise. I also have I bonds from the early 2000s which actually pay interest in addition to the inflation factor. Additionally, I have Single Premium Deferred Annuities which pay 4 to 5%. So, to answer your question: I'm okay with my current mix of "old" fixed income investments. I don't know where one would go NOW to fill in this portion of the portfolio with decent paying fixed income. YMMV