Background: I'm 52 years old with $108K in an IRA and 50K in my stock account which is under my direct control. I am in good health, married, have only one child who is soon to be married, and no debt outside our mortgage (13.5 yrs left). My wife doesn't work. I have no ability to add to my IRA via employment and I believe the IRA will be worth 250K (assuming 6%) in 15 years which is an insufficient amount to support retirement. My stock account is my savings/emergency fund and I have to be careful to preserve principal. But I also know that I need to grow it substantially if my retirement is to be anything other than fraught with fear. So how do I grow my principal without exposing myself to too much risk? What I know - If I can average 6% a year for 15 years, adding $200/mo via dividends, my stock account will be worth $226K. That combined with my IRA will give me $475K in my retirement fund. Still not great but decent. - If I delay retirement until 70, my social security benefits should be around $3400/mo. - my broker charges me 0 for stock/etf buys and 10-12 cents per sale What I believe - Stock investments are the only reasonable way to increase my nest egg - Stock investments played stupidly could cost me greatly, which I cannot afford - Chasing after fads (i.e. gamestop, amc) is more likely to make me lose $ than to gain - Day or swing trading is also more likely to result in a loss - Depending on when bear markets occur (i.e. think of a 40% drop right before retirement), I may not be able to afford to just buy a position and sit on it for 15 years. - I need to educate myself better, particularly regarding buy points. - Margins and options are too risky for someone in my position Other thoughts Below shows the 2021 starting balance in my stock account with 2% potential growth each month for a year. Dividend payments are not included. As you can see, achieving this projection would mean a 26.8% gain for the year. 31-Dec $47,329.29 Jan $48,275.88 Feb $49,241.39 Mar $50,226.22 Apr $51,230.75 May $52,255.36 June $53,300.47 Jul $54,366.48 Aug $55,453.81 Sept $56,562.88 Oct $57,694.14 Nov $58,848.02 Dec $60,024.98 Stocks are in growth mode right now and as we come out of covid-19 I think the growth rate will increase, particularly in oil and gas infrastructure and refining, Disney as parks open up more, travel, etc. Will growth eventually die down and turn into a bear market? Of course but that's par for the course. Anyway I think 2% monthly growth is doable for 2021. Actually I think some months in 2021 will provide much > 2% growth. I read a neat article on the web regarding when to sell to cut losses and the argument is to cut losses at 7% below buy price and invest the money in something else. To find a stock that breaks you even from a 7% loss is not hard in the current market. But finding stocks to recover to break-even point from more severe losses gets much harder. See below. Starting amount Loss Balance % gain needed to break even 1000 10% 900 11.1% 1000 20% 800 25% 1000 50% 500 100% I read another neat article regarding when to cut profits and the argument is to sell once a gain reaches the 20%-25% range. You don't have to sell all, say 33% to 50%. You leave some in case the gain increases further. By selling you lock in gains. A third article I read strongly suggests entering a position in small doses. So you buy x shares of a stock on day 1, see where it goes over a day or 2, and if it looks good, buy x shares again. Maybe you add a third dose of shares a few days later. This makes sense to me, particularly if you are unsure of the proper buy point. A fourth article I read suggested having no more than 10-20 positions in my portfolio as it gets difficult to keep track of more than that. It also suggested being diversified amongst multiple companies in multiple sectors. The idea is to be diversified enough that not all of your positions move negatively simultaneously. What I've learned in the few months I've been doing this Selling at 20%-25% gain can mean missing some gains. I experienced this when I bought 8 shares of Novavax at $127 I think and sold it for $207. Had I held it, I could have sold it for as high as $307. I made great profit but it could have been much greater. However I try to focus joy on what I did gain versus disappointment in what I missed out on. Selling when losses hit 7% below buy price has been a good idea I think. I've tweaked it slightly to sell a position even sooner (5-6%) if it is dropping close to that in a single session when the market as a whole is rising. I'm staying away from jumping in to a position by reacting to individual stocks news like earnings reports. Yes I've missed out occasionally by not buying when a company releases a positive surprise. But I have been burned by buying based on a positive surprise and then seeing the stock price drop. Albertson's which I had bought on 1/12 is a good example. I'm cautious about small cap companies. I've seen great analyst reports and bought positions only to see them drop remarkably without necessarily a newsworthy reason for it. For example ALTO (formerly PEIX) had great analyst recommendations back in Dec. and I thought based upon their specialty alcohol business that they would be a solid company to invest in. After all, people will still be hyper-sensitive to sanitizing their hands even after this pandemic is under control. It didn't turn out that way I envisioned. This is one where I didn't want to quit at 7% loss and I ended up losing 13%. I will never again bear a loss that great. I start positions in the range of $600-$800. I go up from there if things look good after a day or 2. Some of my more distinct losses were due to going in at $2500+ right out of the gate. ALTO (see above) is one such example. Lastly, I've really learned to keep emotions out of the decision making process. I have absolutely no emotional attachment to any position or product. I am solely focused on the goal of growing my portfolio by 33% in 2021. As of today, I am 5.99% up YTD so I ain't doing badly. (In another post I said I was up 5.66%. Just got dividend payments this a.m. hence the 5.99%). Conclusion Looking forward to the rest of 2021! I'll be keeping an eye on trends and will likely tweak my approach further as we get closer to 2022.
"So how do I grow my principal without exposing myself to too much risk?" By being reasonable and rational in your expectations. On one hand you are talking about averaging 6% per year.....on the other hand you are talking about 2% gain per month...at least for this year. On one hand you seem risk averse....on the other you seem to be taking risk to try to get above average gains....at least this year. AND...on the other hand you say...."I am solely focused on the goal of growing my portfolio by 33% in 2021". We have only had two significant down years in the past 19 years. What makes you think we are going to have a bear market any time soon? Just asking.....and curious...dont read this question as commentary for or against what you are doing. Personally.....if it was ME....I would put the majority of my money in the SP500 or the NASDAQ 100........I would willing to take the extra risk....for the next 10 years and RIDE IT OUT. NO market timing...no selling.....and reinvest all dividends and capital gains. I would expect that the.....probability.....would get me my 6% average per year....or more..... by doing that. BUT...I know I would have the discipline to hang in there for the entire 10 years or more. From what I am reading I am not sure.....YOU....would be able to do that in a down year. BUT, BUT, BUT.....I am not you....and this money appears to be critical for you....SO....I am NOT advising you to do anything. You are....somewhat....caught up in the RISK....versus.....return....quandary. On one hand you can not afford to lose the money.....on the other hand you are looking for WAY above average returns. I am curious....how many individual stocks are you intending to hold at any one time? Have you ever invested in stocks or funds before? What was your strategy than and how did you do? I LIKE how you are trying to think this out and find a good answer.....I am just not too sure there is one that will achieve your conflicting goals. BUT......hang in there.......you will figure out what is right for YOU and it will all work out. It sounds like you have at least 15 years till retirement....so....at least you have a pretty good amount of time. At the MINIMUM...I think you are approaching this....quandary....with the right questions to yourself....so I believe you will find an answer that works for you and....you will be OK.
I think we are going to have a hot year throughout 2021. Certain segments of the market like energy and travel have great opportunities to grow. Also there is nothing but stocks to invest in right now that provide a return that beats inflation so I don't see much reason for anyone getting out of stocks. Until something else appears that provides great returns I think stock supply will be low and demand will be high. I hold 18 stocks right now and intend to keep it under 20. Maybe I go to 25 if maintenance isn't a headache. I do have to juggle between risk adverse and taking risk to grow principle. I think I'm likely to be very open to moderate or even high risk taking for 10 years or so and more likely to be risk adverse beyond that. I don't know as this is still a work in progress. What I do know re risk that there are some risks not worth taking. Jumping on the bandwagon to take advantage of shorts ala gamestop is one of them. I'm not touching penny stocks. Day trading is not in the cards and likely neither is swing trading except for maybe rare instances. I guess I'm aiming for as high payback as I can get without taking part in practices that I consider financial Russian roulette. My base mentality is a buy and hold mentality.
You mentioned wondering how I would behave in a down year. Let's assume most/all of my positions are dropping simultaneously, let's say 10% at least off highs. I think I would do the following (WXYZ, I think you are cringing as you read!): - I would sell positions to lock in gains - I would research to find stocks that might be gaining and open new positions. There likely would be some stocks still doing ok. - After letting the prices drop a bit, say another 10%, I would rebuy my original positions. I don't care if it drops a bit further as I can live with that. (Seriously, I don't care if I rebuy at true bottom. There's no way to predict true bottom) - Gain profits as the market turns bull again Remember that I'm largely focusing on solid large and mid-cap companies that are established, and have useful products that last through the years. One of the things I do right I think is that I don't care much that I didn't buy at true bottom or sell at true top. I want to make money. if I could have made 50% profit but I only made 35%, I rejoice in my 35% and try to tweak my approach so I can top 40%. I think my attitude will help me avoid making high risk mistakes.
Sounds like solid thinking. Try to maximize gains....but always try to manage risk and capital. You have a specific situation to deal with....and.....have a plan to do so. Seems like you have enough years to change course if necessary.
Nice approach. I like seeing that you have parameters, but are willing to adjust on the fly. This board is such a great wealth of knowledge. And I appreciate everyone’s willingness to share ideas, and tips they’ve learned along the way. Investors helping investors. It’s pretty awesome. Question for you — and I’ll answer it as well what’s in your portfolio (listed from favorite to least)? Here’s mine, top is funds (I have to carry a bunch for my wife’s 403b - with Morningstar rating), bottom is ETFs/stock: RNPGX: 5* Gold - Tesla fueled Large Cap Blend https://www.morningstar.com/funds/xnas/rnpgx/analysis PGGAX: 4* Bronze - Tesla fueled Large Cap Growth https://www.morningstar.com/funds/xnas/pggax/analysis VIIIX: 5* Gold - Total Stock Market Index https://www.morningstar.com/funds/xnas/viiix/analysis VWINX: 5* Gold - 60/40 Bond/US Stock https://www.morningstar.com/funds/xnas/vwinx/analysis VSGIX: 3* Gold - Small Cap Growth https://www.morningstar.com/funds/xnas/vsgix/analysis PRUFX: 4* Silver - Large Cap Growth https://www.morningstar.com/funds/xnas/prufx/analysis RWIGX: 3* Gold - Growth and Income https://www.morningstar.com/funds/xnas/rwigx/analysis VSCIX: 5* Silver - Small Cap Blend https://www.morningstar.com/funds/xnas/vscix/analysis TRPWX: 3* Gold - Mid Cap Growth https://www.morningstar.com/funds/xnas/trpwx/analysis EILVX: 3* Neutral - Large Cap Value https://www.morningstar.com/funds/xnas/eilvx/analysis TSLA ACES - Green Energy https://www.morningstar.com/etfs/bats/aces/quote VHT - Healthcare https://www.morningstar.com/etfs/arcx/vht/quote ARKK - Innovative Tech https://www.morningstar.com/etfs/arcx/arkk/analysis GOOGL - Google ESGV - Socially Conscious Index https://www.morningstar.com/etfs/bats/esgv/analysis AMZN - Amazon VDE - Energy ETF https://www.morningstar.com/etfs/arcx/vde/analysis VAW - Materials ETF https://www.morningstar.com/etfs/arcx/vaw/quote BLK - Blackrock COST - CostCo HON - Honeywell JNJ - Johnson & Johnson VZ - Verizon SNOW - Snowflake MMM - 3M In the end I’m mostly a quarterly rotational investor (who mostly watches and “rebalances”), but who tries to capture gains on the ups and downs of TSLA and SNOW (my more volatile holdings).
Good stuff in here! WXYZ always gives sound advice. You cannot go wrong there. I am in my mid 30s and pretty much follow his mantra. I am tech heavy (that fits my philosophy of what to expect in the future) and regularly look at ARKK holdings for future guidance. I let Catherine Woods do all the hard work and follow her lead.
WXYZ is a smart fellow and has a lot of wisdom. I think like a long term investor overall but circumstances prevent me from strictly adhering to that investing methodology. This is going to be a fun journey. Heck I'm in the black so chapter 1 has definitely been fun.
You asked which is my favorite position. Probably chicken soup for the soul preferred stock. Up more than 11% with a 9.75% i think monthly dividend.
I have a fun project for the day, to work on when not spending time with the family. The below table shows the ytd of my stock fund in bold versus the ytd of my ira, broken out by each weeks' end. 1/8/2021 2.92% versus 1.35% 1/15/2021 3.95% versus -0.32% 1/22/2021 3.65% versus 2.81% 1/29/2021 2.01% versus -0.26% 2/5/2021 4.44% versus 4.84% 2/12/2021 5.66% versus 7.00% 2/19/2021 5.31% versus 5.69% I'm curious to know what drives the seemingly divergent behavior between the two. Needless to say I'm encouraged that at least I'm doing no worse than the professional managing my IRA.
You've had trouble outperforming since the 2nd week. If I may simply subtract percentages (not really accurate, but with small % it is an approximation): since 1/15: your fund is 5.31-3.95=1.36%, while the IRA is 5.69-(-0.32)=6.01%. It is good for you to have a benchmark. Possible driver could be stock(s) in your fund had drawdowns after ERs (earnings reports). You don't want to miss possible explosions of ERs though; when you get more experience you'll learn how to deal with ERs. I know you're thinking of selling STZ. STZ is a nice stock, just bought at a wrong time. Investors like WXYZ would ignore the second half of that sentence. It's a nice stock imo because it is making higher highs/lows in the monthly chart. This month it ran into a 2x top but I bet eventually it makes it out (not really a brave prediction in a "stonks go up market", I know) I'll mention one thing for you: Get a charting program like tradingview.com which lets you take ratio charts, eg STZ/QQQ. You know QQQ is the technology index; it could also be a benchmark for you (SPY is easier to beat, so if you can beat QQQ you are really starting to make money). Here's the longer-term ratio chart of STZ/QQQ, you can see STZ has trouble beating QQQ. When you get stuck in stocks like STZ you will have trouble beating the market. Things look better in STZ/SPY. It's gotten out of 1 downtrend, so could begin to start beating SPY. STZ is a nice stock, but not a great stock. It's not a breakout stock, but you don't NEED to sell it if you REALLY want dividends. Understand why you choose to sell. Selling because it's not a breakout stock is valid.
Not being a breakout stock is why I want to sell stz. I never buy or sell without knowing why I want to do it. Never on a whim. Forgot to add Thank You! I'll think about what you mentioned otherwise above.
I should add I would have been an addition 1.5% higher I think if I hadn't wasted a bit on reddit hyped positions (AAL, SLV, and one other, I forget) and if I had not sold Novavax so quickly. Especially the reddit hyped stuff, that won't happen again.
I don't understand something about my IRA. My IRA is up 5.68% YTD. Below are the holdings of my IRA and what TD Ameritrade says is the performance YTD followed by the % that each holding occupies in the portfolio: AFMBX - -0.63% 19% of balance MFEKX -1.95% 19% of balance PRJQX -0.62% 26% of balance TRLGX 0.91% 18% of balance OGIIX 4.65 8% of balance JHBSX -.0.53% 5% of balance LBNOX 0.41% 5% of balance I received $70 in dividends and spent $230 in program fees. Unless I'm reading TD Ameritrade screen wrongly, how is the IRA up at all YTD? I think it should actually be down a few hundred bucks. Nothing has been sold since December..
Never mind all. I just figured it out. What a dope I am. Didn't notice that the TD Ameritrade screen shows YTD only through 1/31.
