Investing in the Market -- Tools and Strategies

[Bertilak]

As a recent retiree I have found the time to more closely, and personally, manage my own investments. All is in an IRA.

I'd be interested in hearing from others what tools, techniques, strategies, schools of thought, etc. they find helpful.

In my case I have quickly evolved (over about 4 months) from a value investing point of view to more of a growth-momentum point of view.

Tools I use:

• Charles Schwab account.
• Subscription to Investors Business Daily, their website (investors.com) and their premium service MarketSmith.
• Subscription to American Association of Individual Investors (AAII)
• Subscription to Value Line (online version)
• Subscription to Forecasts and Strategies (Mark Skousen)

The Forecasts and Strategies subscription I have had for years and almost all advice I followed from it has had very positive results. The other stuff is new and I am not sure of its value yet.

There are a few other odd newsletters I subscribe to but I consider them secondary.

So, how do YOU do it?

 

[jazzman]

The only advice I can give you is: Don't buy any stock that I have bought! (It's sort of the kiss of death for any successful company.)

 

[Bertilak]

The only advice I can give you is: Don't buy any stock that I have bought! (It's sort of the kiss of death for any successful company.)

Maybe you could start an advisory service!

 

[raisindot]

As someone who has worked in the investment industry for nearly 20 years is responsible for creating campaign that encourage dray trading, I will advise you that, as a retiree, day trading is that absolute worst thing you can do if you're actually going to need that money for retirement.

Assuming that you've got a Traditional (not Roth) IRA and you're counting on your IRA to fund some of your retirement and you're approaching the minimum distribution age of 70 1/2, you don't want to doing a lot of stock trading. You want to have a good portion of your IRA invested in bonds or bond funds to generate the income you'll need to live on.

You definitely need to keep a good portion of your IRA in equities to allow it to grow in value (important when you'll be required to start taking these distributions). You shouldn't be investing in individual stocks. Instead, you should be investing in either mutual funds or ETFs. Personally, if I were you I'd simply invest in a mix of index funds or EFTs that mirror the S&P 500, Russell 2000, Russell Midcap and one or more international funds, and just leave it be, rather than worry about growth or value. The small investor rarely wins at stock picking. If you must choose individual stocks, go with stable large blue chips that pay dividends (to provide that income you'll need). Retiree may way to focus on defensive industries that tend to perform consistently in all business cycles. These include pharmaceuticals, telecom companies, tobacco and alcohol stocks, and agricultural giants. Instead of investing in individual companies you may also want to look for sector funds that specialize in these industries.

Any good brokerage company (Schwab, Fidelity, etc.) will have a variety of research and screening tools to help you research funds and stocks. If you're looking at actively managed funds, I'd investigate Morningstar and Lipper, which are the two most well know independent fund ratings services.

 

[BCatl]

Don't invest in the market on your own unless you have some feeling for macroeconomics.

No "canned" strategy works. There are different markets all over the world. The US might not be the best one to concentrate in.

My advice would be to learn as much about macroeconomics as you can. Learn about stock markets. Learn about mutual funds and their costs and fee structure. Take your time and educate yourself as much as you can.

Don't follow the herd.

 

[BCatl]

I should mention one other thing. The market needs the small investor to provide liquidity to the market. They want thousands of small investors to patiently invest every month so there is constant buying going on in the market. To a market pro, this is the main function of the small investor: to provide liquidity to a market.

In this way, when the smart money gets ready to dump their shares, there is always a group of suckers to snap them up. Try your best to never be such a sucker.

 

[Bertilak]

As someone who has worked in the investment industry for nearly 20 years is responsible for creating campaign that encourage dray trading, I will advise you that, as a retiree, day trading is that absolute worst thing you can do if you're actually going to need that money for retirement.

... etc...

Thanks for the advice.

I am in the fortunate position of having an excellent pension. Between that and Social Security my take-home is about 97% of my pre-retirement take-home. So far I am comfortable without taking anything out of my IRA. This means can be much more aggressive with it. I want to grow it to meet any inflation or Social Security failure PLUS increase my income to afford a more adventurous retirement.

Also, I enjoy trading in the stock market. But I am NOT attempting to be a day-trader. I think there is a middle ground between that and sitting on few mutual funds, EFTs, etc.. (EDIT: 2008 taught me buy and hold is NOT the best strategy.)

I am considering putting a portion of the IRA in a couple of EFT indexes: S&P 500 and S&P 600.

I think I can "time the market" on a broad scale -- major up- and down-trends. Of course I will not be able to call exact tops and bottoms but believe I can get in on some of the general trends.

So right now I am out of most stocks awaiting market direction. I am heavily invested in bonds and high-dividend paying stocks. Quite a few REITs are paying over 10% and some over 15%.

The way I got out of stocks was not to suddenly decide to sell them but my 5-8 percent trailing stops started to kick in. Those that didn't trigger I still own.

I am still in a learning curve. A few mistakes (minimized by stop-loss orders) will not sink me.

 

[Bertilak]

Take your time and educate yourself as much as you can.

Am doing so! My initiation of this thread is part of that.

 

[professorchaos]

Give your money to a reputable brokerage who has the knowledge, expertise and support system necessary to help you meet your goals.