Just for your own personal knowledge try making a trade on QQQ or SPY on your brokerage account. Put in a trade without finalizing it and watch the bid and ask prices gyrate up and down and the number of shares being traded. I have never made any type of trade without setting a limit price and that is nearly impossible on these highly traded funds. There are many books written on trading and way to much to discuss here. It is interesting to me how small traders as we are are prone to set stops underneath our purchase price so we get out with minimal losses in a down draft. Of course the big traders and hedge funds understand that are are looking to take us out and pocket our 2.5 - 5% by gapping down through our stops. Long term ownership is the only way to build wealth for a small investor.
Personal Finance Financial Planning & Investing
- Thread starter BamaNation
- Start date
I'm up nearly 14% YTD in a 75% Total Stock Market index / 25% Total Bond Market index portfolio (our portfolio also includes a small amount of my wife's company shares that she has to hold onto for a certain period before selling and investing in the 75/25). I don't have to do daily trading or worry about if I'm right or not. I do not stress or get excited over what the market has done, is doing, or will do next. Worry free investing. The only thing I worry about is am I saving enough to retire early 
My philosophy is well known and stated here in these threads. So I'm the last one to comment on any particular platform or trade or stock or position or short or hedge.
HOWEVER, if you (or Mrs. Tug) insist on burning money and you're asking my opinion, then the amount should be no more than 5% of your net worth. Even then, it should only be burnt after you have maximized your available investments/savings (including 401k's, IRAs/Roth IRAs, etc.), have a 3-6mo of expenses emergency fund, and so forth. THEN (and only then) you should decide what to do with the excess funds you want to burn. Then, when it's burnt, it doesn't get resurrected from the ashes. It's gone - forever - and no more playing with fire! 1% of my net worth is not something I'm willing to burn (not to even talk about 5%!)!
One more insight as hinted at by UAH ... you're playing against the guys who have the fastest computers sitting literally feet from the exchange data pipes. When I lived in NYC in late 90's, I had friends that were day traders and did quite well. Sometimes their success was hugely dependent on the fact that they were able to buy/sell/short microseconds faster than their competitors. They also have the ability to see counterparty trades and bid/asks and spreads and can make money on that, too.
My philosophy is well known and stated here in these threads. So I'm the last one to comment on any particular platform or trade or stock or position or short or hedge.
HOWEVER, if you (or Mrs. Tug) insist on burning money and you're asking my opinion, then the amount should be no more than 5% of your net worth. Even then, it should only be burnt after you have maximized your available investments/savings (including 401k's, IRAs/Roth IRAs, etc.), have a 3-6mo of expenses emergency fund, and so forth. THEN (and only then) you should decide what to do with the excess funds you want to burn. Then, when it's burnt, it doesn't get resurrected from the ashes. It's gone - forever - and no more playing with fire! 1% of my net worth is not something I'm willing to burn (not to even talk about 5%!)!
One more insight as hinted at by UAH ... you're playing against the guys who have the fastest computers sitting literally feet from the exchange data pipes. When I lived in NYC in late 90's, I had friends that were day traders and did quite well. Sometimes their success was hugely dependent on the fact that they were able to buy/sell/short microseconds faster than their competitors. They also have the ability to see counterparty trades and bid/asks and spreads and can make money on that, too.
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JMO, but 5% is a solid number to risk as it is enough to make a difference without being too much to really hurt you. But, IMO, if you want to dabble in that kind of risk, I would look to Crypto. Traditionalist investors are even starting to come around and it has more potential for huge gains and losses. HUGE. And, if you are going to gamble, why not?
@BamaNation @4Q Basket Case @UAH @B1GTide
All solid advice folks. I’m talking about an amount equal to a couple weekend trips to to watch the Tide play. She’s talking about summer travel baseball level.
She keep saying day trading (which neither one of us have an idea how to make money at), I keep saying short term investing.
I have no desire to sit around checking stocks all day. I’m more inclined to buy a set dollar amount of maybe 5 or 6 stocks. Then set a reminder on my phone to check them in 6 months.
I’m thinking about buying her a big stack off scratch off tickets for Christmas instead.
All solid advice folks. I’m talking about an amount equal to a couple weekend trips to to watch the Tide play. She’s talking about summer travel baseball level.
She keep saying day trading (which neither one of us have an idea how to make money at), I keep saying short term investing.
I have no desire to sit around checking stocks all day. I’m more inclined to buy a set dollar amount of maybe 5 or 6 stocks. Then set a reminder on my phone to check them in 6 months.
I’m thinking about buying her a big stack off scratch off tickets for Christmas instead.
Look, I see nothing wrong with a relatively small "why not" gamble if that doesn't keep you from eating and it's money that is in excess of all your savings goals.
I hate everything that crypto is about but have been thinking that if there's a dip I might go rogue and buy a fraction of a fraction of a bitcoin and see what happens The main thing is I have to figure out what a "dip" is.
and it's money that is in excess of all your savings goals.I hate everything that crypto is about but have been thinking that if there's a dip I might go rogue and buy a fraction of a fraction of a bitcoin and see what happens
The main thing is I have to figure out what a "dip" is.Taken together, the terms, “short term investing,” and “buying equities,” are an oxymoron.
Equities are long-term. Buying equities with the intent of a short term holding period (less than a business cycle) is gambling.
You can gamble or you can invest. You can’t do both.
Since I’m at work I’m keeping the conversation superficial with her for now.
I think her idea of “day trading” and what I’m reading as actual DT strategies are worlds apart. But it’s not worth arguing over right now.
They crypto thing scares me a little too. It just seems like it’s way to easy for it vanish into the ether.
I think her idea of “day trading” and what I’m reading as actual DT strategies are worlds apart. But it’s not worth arguing over right now.
They crypto thing scares me a little too. It just seems like it’s way to easy for it vanish into the ether.
I get what you’re saying and the comparison to gambling is spot on IMO. What makes this so odd is she is so conservative when it comes to spending.
How do you define a “business cycle”
Currently I have a Roth IRA, Mutual Funds, a secondary stock in the New Economy Funds, and starting in January my I will have a 401k with my company and they match 100%. Hopfully all of this will lead to a good retirement. I keep thinking I can do even more.
My 21 year old son has made over $50k in the last year on crypto, but I still have not taken that step
It’s a fair question, and both more complex and simpler than you might think.
In simplest terms, a business cycle is the time from the top of the previous cycle, through the bottom of the ensuing recession, to the top of the ensuing expansion.
It’s complicated in that it’s backward-looking. As in, you don’t know you’re at the top, (or at the bottom) of the cycle until 6-12 months later.
Further complicating matters, are you talking about top and bottom of a stock market cycle, or an economic cycle?
That matters because the stock market tends to lead the economic metrics. IOW, the stock market peaks before economic metrics do, heads down before they do, bottoms out before the metrics to, and starts to head up before the economy in general does.
Then you get weirdness like external economic shocks. Think Covid. Looking back, with the benefit of 18 months of hindsight, it looks like it was probably a transitory shock. But when you’re in the middle of it, you don’t know if the shock has generational impact — The Great Depression, followed by WWII.
How do you incorporate something like that into where you are in the cycle? It’s not easy.
It’s simpler in that the economic cycle tends to balance itself out over time. It usually runs 7-9 years, exceptions both ways acknowledged.
So if you don’t have, at a minimum, a 5-year holding period in mind — preferably longer — I don’t think you need to buy an equity of any sort. Not a stock, not a mutual fund, not a stock—based ETF. Not nothing.
This is precisely why a 62-year-old has an entirely different investment philosophy from a 40 year old. The 40-year old has 3-4 economic cycles left in his or her earning career. The 62-year-old has less than one. The 40-year-old should be all in on equities (preferably a diversified portfolio, but portfolio construction is another topic for another post).
The 62-year-old doesn’t have time to make up an unfortunately-timed market downturn, and needs to be a bit more conservative.
I know it sounds hopelessly complex, but it really comes down to only a few things:
- Start young. If you’re not young, start now.
- Don’t confuse gambling with investing.
- Don’t confuse wants with needs.
- Don’t borrow money to buy depreciating assets — a diamond ring, a car, a boat, a dinner out on a credit card, etc.
- Max out all tax-advantaged retirement accounts $20K - $25K +/- per earner per year for 401ks and $5-6K +/- per year per earner for IRAs
(Note: I know that seems impossible. Please see my earlier post on how to make it happen)
- Until you reach less than 5 years to retirement, don’t ever ever stop. No matter what your friends or the talking heads or Facebook says. No. Matter. What.
Even with less than 5 years to retirement, you keep investing, it’s just not all in equities.
If you do all that, you’ll retire at 60 comfortably. And we can talk about how to handle the transition from all equities to a more conservative portfolio.
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I agree with 4Q 100% yet again.
I also strongly suggest that, if y'all haven't already, you read the following books in this order.
I trust these authors and have heard many of them speak in person, and read EVERYTHING they write.
Once you've read the above, then you'll have enough info to decide on your risk tolerance, asset allocation, and specific fund allocations and can develop a personal IPS. You might even learn details about things you never knew even existed. You'll understand how active funds lose ~85+% of the time, over time.
You'll understand how to plan your savings appropriately, allocate for appropriate risk-return, etc. You'll have confidence that you're no longer guessing what to do but actually have confidence that you're making reasonable, rational decisions based on fact and not social-media induced, Robinhood-enabled get-rich-quick hype.
You'll know as much as is possible and certainly much more than everyone around you! And you haven't taken extraordinary risk in things that you can't possibly understand. Who can explain bitcoin and the like as a reasonable thing to "invest" in? Not me. A gamble, yes; an investment, no.
Then, and only then, can you make a rational decision of "I've done everything I can do that makes rational sense and I've invested all I can in the right places and at the right allocation and now, with my hard-earned excess dollars that don't have any place to go except in an after-tax brokerage account, I'm willing to gamble a bit on things that I have no understanding of, that make no sense, financially, and I expect to lose every cent that I gamble, but at least it will be fun!" ... Then you can sleep at night knowing you are totally fine with the decision to gamble and lose all you gamble.
I also strongly suggest that, if y'all haven't already, you read the following books in this order.
- The Bogleheads’ Guide to Investing (by Mel Lindauer, Taylor Larimore, Michael Lebouf)
- The Boglehaeds’ Guide to Retirement Planning (by Taylor Larimore, Mel Lindauer, Rick Ferri, Laura Dogu)
- The Bogleheads’ Guide to the Three-Fund Portfolio (by Taylor Larimore)
- The Coffeehouse Investor by Bill Shultheis (Kirkland, WA: Palouse Press, 2005).
- The Little Book of Common Sense Investing by John C. Bogle (Hoboken, NJ: Wiley, 2007).
- The Four Pillars of Investing by Bill Bernstein (New York: McGraw-Hill, 2002).
- The Only Guide to a Winning Investment Strategy You’ll Ever Need by Larry Swedroe (New York: St. Martin’s Press, 2005).
- A Random Walk Down Wall Street by Burton G. Malkiel (New York: Norton, 2003;2016).
- All About Asset Allocation, Second Edition by Rick Ferri (New York: McGraw-Hill, 2000).
- Then all the others listed here: Investing Resources | TideFans.com
I trust these authors and have heard many of them speak in person, and read EVERYTHING they write.
Once you've read the above, then you'll have enough info to decide on your risk tolerance, asset allocation, and specific fund allocations and can develop a personal IPS. You might even learn details about things you never knew even existed. You'll understand how active funds lose ~85+% of the time, over time.
You'll understand how to plan your savings appropriately, allocate for appropriate risk-return, etc. You'll have confidence that you're no longer guessing what to do but actually have confidence that you're making reasonable, rational decisions based on fact and not social-media induced, Robinhood-enabled get-rich-quick hype.
You'll know as much as is possible and certainly much more than everyone around you! And you haven't taken extraordinary risk in things that you can't possibly understand. Who can explain bitcoin and the like as a reasonable thing to "invest" in? Not me. A gamble, yes; an investment, no.
Then, and only then, can you make a rational decision of "I've done everything I can do that makes rational sense and I've invested all I can in the right places and at the right allocation and now, with my hard-earned excess dollars that don't have any place to go except in an after-tax brokerage account, I'm willing to gamble a bit on things that I have no understanding of, that make no sense, financially, and I expect to lose every cent that I gamble, but at least it will be fun!" ... Then you can sleep at night knowing you are totally fine with the decision to gamble and lose all you gamble.
My skills are elsewhere. I have no interest in becoming an expert in investment strategies. When I have pretended to have the necessary knowledge and understanding to manage my finances myself, my finances have suffered. I pay someone else for that - someone with skills in that area.
The simple act of acknowledging what you don’t know and are willing to pay someone else to know for you is huge. So many people never get there.
As the great philosopher ”Dirty” Harry Callahan said, “A man’s gotta know his limitations.”
B1G - Totally understandable and I'm sure you've considered the alternatives and probably understand them. You've realized that it works best for you to let someone else prevent you from making bad decisions. If you've found someone you trust who puts you in a better position than you would otherwise be, that's a rare find - especially after considering the fees paid - but knowing what you don't know (or better yet, knowing what you do know about yourself) is very valuable.
My wife hates ETFs because she wants the best price possible and she might not get the best price of the ETF for the day since it is a spot price. She would rather just have the mutual fund since it is priced at the end of the day (even if it is more expensive, relatively speaking) and it is only available at that price no matter when during the day you bought it. She gets paralysis by analysis.
Me? I couldn't care less because a couple of pennies either way aren't going to make or break me but my wife will stew over not having made the buy earlier or later or tomorrow or last week or next week. So, if the investment has to be in an ETF of a mutual fund (sometimes it is the only way to buy/sell in some accounts without being charged a fee), I do the buying/selling
For some, your approach is obviously better and you've realized that as 4Q points out. For the rest of us, however, we do not need to pay any broker any fees. We only buy index funds ourselves without any broker - The broker ain't gonna get a yacht off us! I had a student a few years ago who had a neighbor a few years older who became a broker. Put the kid in some high-fee IRA accounts. Same thing has happened to some of my family members. Once they realize how much they're paying in fees and that the broker is doing nada for them, they jump off the broker yachts and try swimming for themselves.
The beauty of the 3 (or 4) fund portfolio is that the only thing you need to know is how to re-balance occasionally. Simplicity is awesome. AND you're not locked into some weird, high-fee, non-understandable fund or investment that is almost illiquid but earns the broker high fees.
Obviously, there are exceptions to my "rules" and there are certainly differences of opinions from mine. However, I want people to know they have options and that's what this whole Personal Finance series has been about - educating and informing so we have enough info to actually make smart decisions understanding there are always choices and consequences no matter the choice.
My wife hates ETFs because she wants the best price possible and she might not get the best price of the ETF for the day since it is a spot price. She would rather just have the mutual fund since it is priced at the end of the day (even if it is more expensive, relatively speaking) and it is only available at that price no matter when during the day you bought it. She gets paralysis by analysis.
Me? I couldn't care less because a couple of pennies either way aren't going to make or break me but my wife will stew over not having made the buy earlier or later or tomorrow or last week or next week. So, if the investment has to be in an ETF of a mutual fund (sometimes it is the only way to buy/sell in some accounts without being charged a fee), I do the buying/selling
For some, your approach is obviously better and you've realized that as 4Q points out. For the rest of us, however, we do not need to pay any broker any fees. We only buy index funds ourselves without any broker - The broker ain't gonna get a yacht off us! I had a student a few years ago who had a neighbor a few years older who became a broker. Put the kid in some high-fee IRA accounts. Same thing has happened to some of my family members. Once they realize how much they're paying in fees and that the broker is doing nada for them, they jump off the broker yachts and try swimming for themselves.
The beauty of the 3 (or 4) fund portfolio is that the only thing you need to know is how to re-balance occasionally. Simplicity is awesome.
AND you're not locked into some weird, high-fee, non-understandable fund or investment that is almost illiquid but earns the broker high fees.Obviously, there are exceptions to my "rules" and there are certainly differences of opinions from mine. However, I want people to know they have options and that's what this whole Personal Finance series has been about - educating and informing so we have enough info to actually make smart decisions understanding there are always choices and consequences no matter the choice.
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What a great line...."social-media induced, Robinhood-enabled get-rich-quick hype."
I'm going to use that some day. And when I do, I'll credit you.
@Bamaro - given the max Series I Bond amount you can get is $10k/person it's not a bad way to save extra/free cash right now. It's about 7% more than you can get at your bank! (of course the 7.12 is really 3.56 for next 6 months, and then it will reset again, but looks like it could still be even more than that given present inflation.
(of course the 7.12 is really 3.56 for next 6 months, and then it will reset again, but looks like it could still be even more than that given present inflation.
Thanks, I forgot about the 10K limit.@Bamaro - given the max Series I Bond amount you can get is $10k/person it's not a bad way to save extra/free cash right now. It's about 7% more than you can get at your bank!
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