Investing: What's Your Strategy?
I have to admit something, I didn't actually watch The Big Short until the past year. I know I know, blasphemy! This should certainly be a movie that is in everyone's, who is interested in investing, catalog. At least, for nothing else, to build a generic understanding of how markets work. Call me extremely late to the game, but it wasn't until I watched this movie that I became significantly more aggressive at my investing game.
I do want to say that I understand many people form their own strategy when investing, as they should. It's their money they're gambling with and they should have absolute control over it. What I am about to write is my personal strategy that has worked for me. I would highly recommend, whoever is interested in investing, do a ton of research on markets, accounts, and what would work best with their interests.
With that said, my personal opinion is that this was a fantastic film. Definitely, one that is worth watching multiple times. I felt most intrigued by Christian Bale's character, Michael Burry. At this time, my main career path has been a data scientist. This means that someone comes to me with a business case, I form a hypothesis to test and then comb through millions of data points to test said hypothesis, in a nutshell. Exactly what Michael Burry did when he identified there was going to be a crash in the housing market in 2008.
To form my personal strategy, I adopted some of Dr. Burry's tips, and also a few additional, that I'll share with you to help get you started with a basic foundation. Some of the tips are more aggressive than others, but that's to balance out any possible losses.
Stock Market Investing:
Invest when the current stock price is 10% to 15% above the 52 week low.
We know that companies will return to at least mid-point of the 52 week average, so if we look for companies that are currently trading low, the ROI is there when the stock returns to mid-point or greater happens.
Sell if a new 52 week high is hit
I've taken the approach to sell as soon as a 52 week high is hit. When I notice a stock quickly approaching a new high, or market research shows that this will soon happen, all eyes are on target. I often keep the market open and refresh the page every few minutes to watch. I may set a sell order to happen if it hits slightly above the high, but rare because of my next point.
Sell when the market opens
Typically a stock will open a few cents higher than it closed, especially if the previous day trajectory was upward. Because of this, the best time to sell is when the market opens.
Penny stock investing
Now I know some will say this is extremely risky, and I would agree. This is what I consider my "play" money. Meaning that if I lose it then it's accepted. However, if you do enough research and focus on companies in this range that are making very strategic moves then the payoff can be significant from the amount invested. I like to look for companies that are consolidating, or have an aggressive growth strategy.
401k Investing:
Split 401k to 50/50
I've taken the long term approach of splitting my 401k to 50% standard, and 50% Roth. This allows for substantial growth while also maintaining a baseline of holdings.
Cryptocurrency Investing:
While I'm still new to the game on this one, I'm also late to the game. Bitcoin has grown from $600 value, in 2012, to over $8000 today. Currencies are extremely volatile and have shown a major return. It's not unheard of for individuals to see upwards of 27% ROI within 2 months. Now the caveat here is the volatility. Because of this, it is open to a major crash, which has happened before. However, current market shows nothing but future growth and expanded popularity as we move to block-chain technology.
These are a few of the methods that I have implemented in to my strategy and hopefully can provide you with some general foundations as you build yours'.
I would love to hear from you below what prompted you to become interested in investing, and your strategies!
Thanks for tuning in today, and that is your Daily Dose of Dapperness!
About Me
Hi, my name is Blake. I'm a true fan of the 1950's style gentleman, a father by trade, and adventurer by night.
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Interesting post @dapperdadclub thank you. For me I have changed all my contributions to the ROTH 401K since the company match goes to the traditional 401K. So not quite 50/50 but the ROTH side needs to catch up anyway.
I was interested in your Buy point. I use something similar for what i call my "Legacy" 401K investements. This is the side of the portfolio that generates dividends or interest and I look to buy it when it goes on sale. My buy up to price is 25% above the 52 week Low and also perhaps strangely when it is below its 200Day MA. At 10 to 15% the bargains are better but I would have had to wait a long time to buy in this market. Like most people probably the options in my 401K are largely mutual funds and ETFs which are hard to establish a true value analysis for hence I have used the 25% price as a proxy. I have no intention of selling this side since the legacy funds generate income regularly (they pay me to hold them). Its like owning a property that spins off cash. I dont sell it because the property market goes down. I go out looking for bargains. I have 20% of my 401K in a tactical strategy that will move to fixed income in the event of a downturn and therefore give me the cash to pick up bargains on the legacy side.
That's a great strategy to go by! I decided to go 50/50 split because my company match isn't strictly towards a traditional or roth, but based off of a percentage of total contribution.
I like the approach you've taken to be more conservative of 25% above 52 week low. My stock investment is personal assets so I more look at it as "test" money for 401k money movement.
Agreed i tested my ideas in a regular stock portfolio to see how DGI worked. Then looked at how I could apply the same thinking inside the 401K. The hard part for me was finding out which funds paid routine distributions. Fidelity always tries to argue with me that it doesn't make a difference but the only way to get compounding to work is if you get extra units.