Getting my Stock On

[errantember]

After re-taking part of my InvesTOOLS stock trading course online, I returned to my beleaguered portfolio to do some damage control. For those not familiar with my current situation, the trading platform I use doesn't support trailing stops, which automatically sell you out of a given position when it drops below a certain amount. I got caught with my pants down a few months ago when we had the big correction, and a bunch of stocks went into the toilet. This was a very basic trading error, and one I won't make again. In the meantime, I've managed to shore up my position some and recoupe a substantial percentage of my loss. Today I went through all my stocks again, looking at each's trends and technical indicators as well as the industry group performance. The industry a stock belongs to influences the value of stocks in it very strongly, so it's good to be in industries where big investment companies are putting their money, and bad to be in groups they're exiting. I've got my free funds transferring into solid, uptrending companies in uptrending industry groups, am selling out of a few positions with little upside potential, and still sitting on a few stocks that are in the toilet but might recover rather than taking the massive loss of selling them.

Comments

[jb-27.livejournal.com]

When I hear people talk about playing the stocks, I'm always a little curious how well they're doing compared to an indexed approach. I've got my IRA split equally between four no-load mutual funds: S&P 500 index, NASDAQ index, bond market, and foreign (VFINX, VBFMX, VEURX, NAESX, if you're curious). At the moment, they are up 25%, 2%, 35%, and 14% (in no particular order), for an average return of 19% over about 2.5 years since I started this IRA. I realize that short-term gains can be offset over time, and I shouldn't expect an average that high, but holy cow, it seems to be pretty good considering all I do is dump money in and forget about it. I guess if playing stocks is fun for a person, then it's no less worthy than any other hobby (I, personally, like poi and shooting), but I sometimes get the sense that stock traders think they can outperform a balanced, indexed strategy, and I wonder how often that's actually true, considering the trouble to which they seem to put themselves.

That depends on a lot of factors

[errantember.livejournal.com]

As far as dumping money into funds and forgetting about it, index funds are the way to go. Outperforming the market can be done by the average investor, but it takes either a lot of work, expensive tools, or both. Index funds are good because they define the market that not many people beat consistantly, and there's no incentive for the broker to fleece you, since the decisions are made by the market itself. If you want to do a little more research, there are some mutual funds and Exchange Traded Funds that usually outperform the index funds, but then you get to where you need to start babysitting and deciding when one fund might do better than another, etc. ETFs work like mutual funds except that you can trade options on them. Being able to do basic options can add a few percentage points to your return and also provide insurance when an obvious downturn is occuring.