T Nation

Unconventional Investors in the House?

Well, I’m tired of just seeing day traders, gold traders, market timers, &c. post their threads with their trades (or, not) in it. I understand the excitement of market timing, I’ve done it and the adrenaline rush is similar to gambling (at least for me-that’s why I’d rather just go play poker, less chance of lossing my money).

I personally have made a promise to myself to never invest based off market timing again. Though always have I invested most of my estate (read, >95%} based off fundamental principles, I now handle ALL of my estate based off fundamental principles (read: 97%, because of temporary cash holdings).

This thread will be about my activities in a Roth IRA in which I have $26,000 invested. (I have other brokerage accounts, but I do not feel comfortable discussing those here, but I make similar moves in those accounts just different particular investments (read: same type)), since there won’t be much activity (I make moves once a quarter…that’s if my stocks move too far away from each other).

Since, I move so infrequently this thread can be a couple of things…a book club, where we discuss books written on the fundamentals of investing…my suggestion Unconventional Success.

Other suggestions:
Discussing fundamental principles of investment
Asking questions about FPI
Asking questions about Asset Allocations, Lowering of Costs, and avoiding Taxes.

If you ask me a question about Market Timing or “Tactical Asset Allocation” I won’t answer it.

Next post, I’ll post numbers.

Not numbers, but Audrey Assad is going to be on stage in a few hours, so time to do curls. #WhatYouPacking #22Inches

I’m not sure what’s going to happen if I’m all bro’d out for a Christian hipster’s concert, but I still gotta get my swole on.

Pax,

BC

Do you have a broker or manage your own accounts?

[quote]Gettnitdone wrote:
Do you have a broker or manage your own accounts?[/quote]

Both. Mostly for tax reasons*.

  • Well, and the fact that he supports a couple of non-profit groups I used to work for and currently work for.

I just turned 24 and recently invested 4500 into a Roth IRA. Right now I have 2 ETFs and 1 mutual fund. Most of what I buy I’m looking to hold onto for a while. I’ve been doing most of my research on seeking alpha and motley fool, as well as morningstar while I had a free trial subscription to the site. I’m definitely interested in hearing from some people who have been doing this for a while as I still have a lot to learn.

[quote]Brother Chris wrote:

[quote]Gettnitdone wrote:
Do you have a broker or manage your own accounts?[/quote]

Both. Mostly for tax reasons*.

  • Well, and the fact that he supports a couple of non-profit groups I used to work for and currently work for.[/quote]

What kind of fees does your broker charge and what was the minimum starting capital you needed to invest to use his services?

What’s the best online broker, IYO (probably the one you use)?

[quote]relentless2120 wrote:
I just turned 24 and recently invested 4500 into a Roth IRA. Right now I have 2 ETFs and 1 mutual fund. Most of what I buy I’m looking to hold onto for a while. I’ve been doing most of my research on seeking alpha and motley fool, as well as morningstar while I had a free trial subscription to the site. I’m definitely interested in hearing from some people who have been doing this for a while as I still have a lot to learn. [/quote]

Are they broad funds (index) or industry/commodity funds?
If you plan on holding onto those funds for a while you don’t need to waste your time researching new investments.

[quote]Gettnitdone wrote:

[quote]Brother Chris wrote:

[quote]Gettnitdone wrote:
Do you have a broker or manage your own accounts?[/quote]

Both. Mostly for tax reasons*.

  • Well, and the fact that he supports a couple of non-profit groups I used to work for and currently work for.[/quote]

What kind of fees does your broker charge and what was the minimum starting capital you needed to invest to use his services?

What’s the best online broker, IYO (probably the one you use)?[/quote]

$30k @ 1% of assets. He works out of Stifel Nicolaus.

Edit: Schwab, they allow free trading in funds that I like personally and I get free ATM usage around the world (bc of the attached checking account the brokerage account is free…and I travel so much that I need to be able to just pull cash where ever).

[quote]Gettnitdone wrote:

[quote]relentless2120 wrote:
I just turned 24 and recently invested 4500 into a Roth IRA. Right now I have 2 ETFs and 1 mutual fund. Most of what I buy I’m looking to hold onto for a while. I’ve been doing most of my research on seeking alpha and motley fool, as well as morningstar while I had a free trial subscription to the site. I’m definitely interested in hearing from some people who have been doing this for a while as I still have a lot to learn. [/quote]

Are they broad funds (index) or industry/commodity funds?
If you plan on holding onto those funds for a while you don’t need to waste your time researching new investments. [/quote]

Well even though they’re long term investments I still like to stay current. For example the mutual fund I own is PRHSX. It’s a health sciences fund that was given a 5 star gold rating by morningstar for years. Just recently the fund manager has left however. So while I don’t plan on selling it anytime soon, it’s something I’m going to watch. If the fund doesn’t perform as well under the new manager, I might not want to keep putting money into it, and may favor my 2 ETFs when I put my 2013 deposit into my Roth. Does that seem reasonable?

I have my Roth IRA with Option House. Decent platform and great fee structure. Very cheap transaction cost and no other fees like maintenance and other bullshit. I’ve been crazy busy with my new job so I don’t have much time to devote to investing. I’ve mainly been following Dogs of the Dow and buying basic undervalued companies that are solid with a decent dividend. Solid returns and security with very minimal time commitment from me.

If you really want to get unconventional you could go to a custodian that will allow you to lend money to other investors and companies. A lot of real estate investors do this and they’ll lend their IRA money to other investors they know and get 10-12% on their money that is backed by real assets. The plus to doing this is your RE buddies will usually return the favor so you can invest their money in RE if you want.

It’s a nice way to get around not being able to use your IRA money to buy your own RE assets. You can also invest in companies as long as you don’t control the majority. So if you had an LLC setup to invest your money in RE or whatever you can’t own more than 49% of it and you can’t do any of the actual work towards what your IRA money is invested in.

There are a lot of nuances that’s why most people just lend their money to friends/partners and vice versa. Much easier to not have an accident that you now own tons of taxes and penalties on.

yeah it sounds reasonable but be prepared to feel guilty if you sell it low after it has under-performed and then it surges again. You might want a reasonably long time horizon to evaluate whether it has underperformed.

EDIT: above directed at relentless

[quote]Gettnitdone wrote:
yeah it sounds reasonable but be prepared to feel guilty if you sell it low after it has under-performed and then it surges again. You might want a reasonably long time horizon to evaluate whether it has underperformed.

EDIT: above directed at relentless[/quote]

i’m a little confused on what exactly you guys are measuring your IRA performance against?

Nominally what kind of gains are you expecting over 10 years as an example?

[quote]TooHuman wrote:
i’m a little confused on what exactly you guys are measuring your IRA performance against?

Nominally what kind of gains are you expecting over 10 years as an example?[/quote]

http://finance.yahoo.com/q?s=^GSPC&ql=0

^GSPC or S&P 500


I don’t normally look at the nominal return, but I expect the market return. Very few if any managers consistently beat the market…I know I can’t (though I sometimes dream that I could). That’s why I advocate passive management for the personal investor.

[quote]Brother Chris wrote:

[quote]TooHuman wrote:
i’m a little confused on what exactly you guys are measuring your IRA performance against?

Nominally what kind of gains are you expecting over 10 years as an example?[/quote]

http://finance.yahoo.com/q?s=^GSPC&ql=0

^GSPC or S&P 500


I don’t normally look at the nominal return, but I expect the market return. Very few if any managers consistently beat the market…I know I can’t (though I sometimes dream that I could). That’s why I advocate passive management for the personal investor. [/quote]

Now i’m really confused. The S&P has been garbage over the long term. It’s lost money adjusted to inflation. The term “beat the market” is all smoke and mirrors bullshit to push the idea that the S&P as a whole actually “performs” better over a long period of time than other assets. That hasn’t been true for at least 2 decades.

Nominal just means the literal numerical return priced in the currency you bought/sold the asset in.
This differs from real return which is adjusted to the purchasing power(inflation) of the currency you’re measuring it against.
very few managers beat the market because they aren’t trying to. They are selling you the flavor of the week or a popular product.

If you want to preserve your purchasing power over a multi-year period, you just buy gold.
If you want to make an income from investment then you invest in companies with real revenues and solid fundamentals with a good p/e ratio.
Stocks are just a way to invest indirectly in the growth of a business.
If you’re not getting a dividend, you’re not investing.

[quote]TooHuman wrote:

[quote]Brother Chris wrote:

[quote]TooHuman wrote:
i’m a little confused on what exactly you guys are measuring your IRA performance against?

Nominally what kind of gains are you expecting over 10 years as an example?[/quote]

http://finance.yahoo.com/q?s=^GSPC&ql=0

^GSPC or S&P 500


I don’t normally look at the nominal return, but I expect the market return. Very few if any managers consistently beat the market…I know I can’t (though I sometimes dream that I could). That’s why I advocate passive management for the personal investor. [/quote]

Now i’m really confused. The S&P has been garbage over the long term. It’s lost money adjusted to inflation. The term “beat the market” is all smoke and mirrors bullshit to push the idea that the S&P as a whole actually “performs” better over a long period of time than other assets. That hasn’t been true for at least 2 decades.

Nominal just means the literal numerical return priced in the currency you bought/sold the asset in.
This differs from real return which is adjusted to the purchasing power(inflation) of the currency you’re measuring it against.
very few managers beat the market because they aren’t trying to. They are selling you the flavor of the week or a popular product.

If you want to preserve your purchasing power over a multi-year period, you just buy gold.
If you want to make an income from investment then you invest in companies with real revenues and solid fundamentals with a good p/e ratio.
Stocks are just a way to invest indirectly in the growth of a business.
If you’re not getting a dividend, you’re not investing.[/quote]

Uh huh…want to explain your 5-6 claims, because I call bullshit on all of them.

Hey. I just came up with a pretty decent investment scheme!

Check out this chart on Microsoft;

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=msft&insttype=&freq=2&show=&time=20

Buy at 25 and sell at 30. Doing this over the time period shown, looks like about 11 years, would give you 7 round trips and turn 2500 into more than 10,000. Thats not even factoring in the dividend, which is pretty decent these days and you would get over half of them.

Usually about the time you can spot these patterns is the time they go away but what the heck, next time msft hits 25 I’m in for 100 shares. Microsoft isn’t going any where so my biggest risk is that it gets away from me and with all the over-head on the market these days I don’t think that’s too likely.

BC, what do you mean by “tactical asset allocation”?

[quote]on edge wrote:
Hey. I just came up with a pretty decent investment scheme!

Check out this chart on Microsoft;

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=msft&insttype=&freq=2&show=&time=20

Buy at 25 and sell at 30. Doing this over the time period shown, looks like about 11 years, would give you 7 round trips and turn 2500 into more than 10,000. Thats not even factoring in the dividend, which is pretty decent these days and you would get over half of them.

Usually about the time you can spot these patterns is the time they go away but what the heck, next time msft hits 25 I’m in for 100 shares. Microsoft isn’t going any where so my biggest risk is that it gets away from me and with all the over-head on the market these days I don’t think that’s too likely.[/quote]

Don’t think it’s a good idea. Past performance is not indicative of future performance. It is also extremely foolish to think that MSFT is “not going anywhere” as well. I can envision a world where MSFT is at half its value in 5 years and completely irrelevant in 10 years. Surface tablet bombed, Windows 8 sucks, windows phones are just laughable, Google and twitter own search, Facebook and linkedin own social. PCs have been a dying market for awhile now and the laptop market just contracted for the first time ever last quarter. Not only that, but tablets are set to overtake laptops in total sales this year, and microsoft is getting crushed by apple and android-based tablets.

The only reason microsoft is still a profitable company is because most businesses still run windows and use MS office, which could easily change. We wouldn’t need to see the complete destruction of microsoft to see the stock price tank like a rock. All they have to do is report 1 bad quarter and cut their dividend and that stock falls 30% overnight.

With a plan like this, I think it would be easier to pick a stable regional bank, like WFC. Since nearly all their business is mortgages done in the US, the odds of the company having a really bad quarter are very low. Interest rates are very low and the housing market, though recovering, is still near its bottom. Definitely think it is ideal to trade in a winning company rather than one with a questionable future like MSFT.

[quote]challer1 wrote:
Don’t think it’s a good idea. Past performance is not indicative of future performance. It is also extremely foolish to think that MSFT is “not going anywhere” as well. I can envision a world where MSFT is at half its value in 5 years and completely irrelevant in 10 years. Surface tablet bombed, Windows 8 sucks, windows phones are just laughable, Google and twitter own search, Facebook and linkedin own social. PCs have been a dying market for awhile now and the laptop market just contracted for the first time ever last quarter. Not only that, but tablets are set to overtake laptops in total sales this year, and microsoft is getting crushed by apple and android-based tablets.

The only reason microsoft is still a profitable company is because most businesses still run windows and use MS office, which could easily change. We wouldn’t need to see the complete destruction of microsoft to see the stock price tank like a rock. All they have to do is report 1 bad quarter and cut their dividend and that stock falls 30% overnight.

With a plan like this, I think it would be easier to pick a stable regional bank, like WFC. Since nearly all their business is mortgages done in the US, the odds of the company having a really bad quarter are very low. Interest rates are very low and the housing market, though recovering, is still near its bottom. Definitely think it is ideal to trade in a winning company rather than one with a questionable future like MSFT.[/quote]
A bit overdramatic IMO. I agree things COULD go bad, but I think it all comes down to a race between ARM and x86. When performance, power consumption and price converge one will eventually win. And intel has a huge lead in manufacturing technology.

Many buy tablets but end up wondering what the hell to use them for. I don’t see them replacing computers any time soon. It’s more likely that computers will replace tablets IMO. Microsoft had to go that way with Windows 8.

[quote]kakno wrote:
A bit overdramatic IMO. I agree things COULD go bad, but I think it all comes down to a race between ARM and x86. When performance, power consumption and price converge one will eventually win. And intel has a huge lead in manufacturing technology.
[/quote]

ARM vs x86? Consumers don’t care about that nerd speak. The idea of shopping for hardware based on performance is dead to the masses. The most visited sites on the US are google, facebook, youtube, yahoo, and amazon. People search for information, get on facebook, troll youtube, read the news, and shop online. Hardware is so far ahead of software that it hardly matters at this point.

[quote]kakno wrote:
Many buy tablets but end up wondering what the hell to use them for. I don’t see them replacing computers any time soon. It’s more likely that computers will replace tablets IMO. Microsoft had to go that way with Windows 8. [/quote]

Computers will replace tablets? That’s preposterous. You are letting your prejudices blind you to the future. Even though I am a PC guy myself, writing this post on a $1500 custom desktop, I realize that technology goes one way and it is not backwards. You or I might feel that way about tablets, but the average user is not doing real work on their tablet nor are they playing high end games. The tablet does just about everything they need.

The way tech for the average user is heading is toward the cloud. The devices consumers will buy simply be an interface to interact with cloud-based applications. The idea of a computer or individual tablet will slowly fade, as users access the same base of information and software whether they are using their phone, tablet, or other yet developed device. Office computers will be replaced with workstations consisting of a small piece of hardware and a broadband connection for accessing the cloud. A keyboard and mouse (and perhaps possibly touch screen/voice commands) for improved efficiency are a possibility, but the resurgence of desktops is not.

At any rate, we’re talking about trading and investing. The stock market trades on the future, and most of the old people that control most of the money in the game are easily influenced since they don’t “get” tech. It only takes a few analysts predicting Microsoft’s decline to topple the stock, killing the trade.

Regardless, we do agree on one thing: things COULD go bad. The OP’s manner of trading in a company where things could go bad (and possibly never recover) is not good. If the share price drops to 25 because these events unfold… the stock could easily just keep going down never to reach 30 again, and the OP has lost a ton of money.

It would be easier to play this kind of strategy in a company which is practically guaranteed to be better in 5-10 years than it is today. If you buy right before a fall, eventually you’ll get your money back.