Investment Strategies

[AndrewWiggin]

What are your investment strategies? I only bring this up because my parents are telling me about their shift in strategy from buy and hold to buying and selling like every day.

I don't understand how you'd make any money off of daily trading, and I think the strategy would ultimately wipe you out once you start preparing your taxes for the 4,000 capital gains issues you'd have at the end of the year.

I know there was a thread earlier about e trading, and a lot of people talked about index funds, but does anyone have an aggressive buy and sell strategy?

 

[andrewckellogg]

What are your investment strategies? I only bring this up because my parents are telling me about their shift in strategy from buy and hold to buying and selling like every day.

I don't understand how you'd make any money off of daily trading, and I think the strategy would ultimately wipe you out once you start preparing your taxes for the 4,000 capital gains issues you'd have at the end of the year.

Not to mention broker fees

 

[SpyvSpy]

I have no idea when it comes to stocks but this guy seems to have the right idea.

http://www.youtube.com/watch?v=OyEU7R0AWr0&feature=youtube_gdata

 

[JoshSD]

Buy and hold.

 

[raisindot]

Day trading is a recipe for disaster. The amounts you pay in commissions for day trading and short term capital gains will easily soak up any small gains you've made. And, as a small investor, you'll never be able to get in the best orders because the institutional traders, who know much more than you and get the best deals, with get there first. You might as well play the slot machines.

Instead, if you want an aggressive strategy, be a contrarian long-term investor and invest in disfavored low-priced stocks in industries that are battered now but that you think will grow over time. Find a company whose stock is selling low, has a relatively low P/E ratio, but has strong fundamenals and a fair amount of trading volume on a daily basis. Then buy hundreds or thousands of shares, and sit and wait. It may take a year or more for the stock to go up, but if it doubles its share price you'll do better than if you used that same money and bought fewer shares of a higher-priced stock.

The trickiest part is figuring out the industries. I tend to overweight in mining stocks, because I believe that, over time, most countries are going to be spending money on infrastructure, and that means they're going to need steel, tin, zinc and copper. Two years ago I spread $5,000 among 10 gold, copper, and general mining companies that were trading at around $2-$3 a share. Three of these companies have become penny stocks. Two are still trading around the same price I bought them. Two are now selling above $7 a share, two are over $10 a share and one is around $15 a share. That $5,000 investment is now worth around $18,000.

Oh, and I also bought several thousand shares of several battered banks in the first quarter this year at prices ranging between $2-$4 a share. Needless to say, I've at least tripled my money on all of them.

Jeff in Boston

 

[AndrewWiggin]

I would assume that the strategy would be an online broker so the fees would be pretty low... But yeah, the capital gains would rip you apart I'd think.

That being said I think if you could manage it then your weekly return would be better than leaving money in a savings account or any other investment... I still don't think it's a sound strategy though.

 

[WhosYerBob]

One of my relatives has lost his fortune, his dad's fortune and his wife's fortune by being a day trader. Smart guy, but dumb as a brick when it comes to knowing when to buy and sell.

Me? I buy and hold.

 

[raffijian]

If you take a percentage of those who day trade and those who buy and hold, more buy and hold investors will get ahead.

If you have to sell, I do recommend selling only after a year has gone by and at least that way you can lower the capital gains tax to 15% of your profit. Of course you would want to sell when a gain has been made to rake in profit.

Too much gets lost in day trading when commissions are taken out. Keep in mind commission rates are low, but they add up very quickly when day trading.

If you don't know what you're doing, a lot can be lost.

 

[rickboone1]

I use a some in all strategy. I have some things I trade almost daily, others have been bought and forgotten or hold. The daily stuff is like playing a slot machine in a way. All the market is, really. You don't know what you're going to end up with. The best advice I got years ago when I first wanted to start building wealth was this....Invest and Forget. Write that money off. You'll sleep a lot better at night knowing that. If that makes sense. Say you have 10 grand you are putting into the markets. If you invest it with the idea you'll make money, you are bound to lose. And, you'll quickly be out 10 g's. However, if you just "forget" about it, even when you are trading on a regular basis, you are a lot less stressed. Okay, I'm confusing myself now too.

Anyway, there's not a right or wrong strategy. I always suggest you do a little of each, find what makes you happy, and focus more attention there.

 

[SiBurning]

If you don't understand it, don't do it. It takes a lot of time to watch things. It's easy to make money in a bull market when everything's going up. It's also easy in a bear market when everything's going down. The hard part is making money in a churning market. The other part of this is understanding your time frame, not in terms of when you'll need the money, but in terms of how often you can keep track. The more you can pay attention, the shorter your time frame can be. The math says you make a lot more money playing shorter terms. Day traders largely ignore the longer time frames, but not completely because they are the biggest factor, and things work differently in a bull vs a bear market. Right now, by any measure, we're no longer in a primary bull market for stocks or bonds, and historicaly, buy and hold in a bear market is a losing strategy. Then again, there's always a bull market somewhere.

If you're not going to invest the time and effort to learn and pay attention, then you need a set it and forget it strategy. Pick some percent in different asset classes, rebalance every year, and just put money in each paycheck. That works best for zero time investment. How you invest beyond that is mostly a matter of how much time you put in to learn, watch, and pay attention; whether you have the knack or knowledge, skill, and discipline; and how much you can stand or enjoy doing. There's some very interesting longer term strategies.

 

[rm71]

I'm no Warren Buffett, but it is "Time in the market, rather than timing".

 

[Tha Baron]

Day trading is a recipe for disaster.

There is an old Wall Street adage that goes something like this:

"The markets can stay irrational longer than you can stay solvent..."