Started off 2016 by considering the tone of the market-took 2 small short positions earlier this week -SIJ, TVIX. Had some "open time" and not pressured too much with the day job the past week-
SIJ shorts industrials, theme play there is that a global slowdown and higher dollar will be particularly difficult for the international industrials. Look at the drop in GE's stock the past few days. While TVIX tracks the Vix as an Ultra 2x. I didn't I closed both trades today at 3:50 pm. Unfortunately, the gains from the 2 trades were offset lower by stopping out in DTN. a conservative dividend fund that broke to new recent lows.
China circuit breakers alarmed the markets- and added to the fear of the unknown-
tonight - China is not implementing circuit breakers-
So , a clean slate - In the past, volatility spikes have often been short lived-and I tended to hold thinking a larger move would occur- but perhaps we're indeed going back to a deeper correction this time- it certainly 'sounds' that we are in a more significant sell-off- and it's global as well.
Getting defensive both in my trading - and in my investing.
Smaller individual positions- and more focused on finding weak segments to take short positions in- not always try for the bullish side- and perhaps develop the stomach to withstand a wider volatility.
Since All my trading is done with Roth accounts- I'm not allowed to short- but i can find plenty of inverse ETFs that allow that to occur. Thanks for the EEM short suggestion- I think that will also be in play - after any kind of EEM bounce.
I have held a significantly larger cash position in my retirement accounts for the past year-
Actually going to see a financial Adviser for a follow up on his review of my present situation and coming into retirement age over the course of this year + . Presently age 65-
I'll use that as a lead-in for the remainder of this post . Hopefully I shorten this substantially from the initial draft I started a few days earlier-.
I have a younger co-worker that spent over $15,000.00 in getting his trading education from a well-known teaching firm- and his focus is trading Forex and he is quite optimistic .
He has decades ahead, and plenty of time. I asked him if he had an alternate plan- a Plan B- just in case his trading did not work out as he anticipated- and he did not-
If the professional traders underperform the indexes by 85%- and they have plenty of cash, years of experience- That assumes that perhaps 10-15% may out perform in an average year.
What would be the actual % of retail traders that actually outperform- not just over 1 trading year- but perhaps over 5-10 years? With 5 years of a bull market now behind us -and 2015 a transition market that had very little market participation across the broader market-led by a relatively few large caps - it appears we are on the verge of getting a PE Reset.
Perhaps long overdue- and maybe even the Fed manipulation will no longer be all it takes to prop this market up. \ Maybe I'm too negative?
We've had substantial market corrections over the past 15 years- and we are certainly past due for another- The past bull market from 2009 was one of the longest historically- thanks to the Fed propping it up with rate policy and massaging the market psychology with
periodic supporting interim statements.
There will have been a large number of newer market participants that have now found themselves on the down hill side of a market that has peaked. Environment has shifted- and different forces are in play. this is why traders/investors that have held a rigid approach may have issues with adapting to a changing environment - They have not experienced it-
What is Plan B and WHY have a Plan B?
Simply- that none of us know what the future may bring- So Trading gains in one period can fill one's belief's that everything is under control and the Future is rewarding-
But the market- over decades brings changing environments and what works today may not work tomorrow- What has worked? Over the long term- a consistent and steady contribution into a retirement plan- Buying the investments during declining periods and also in rising periods- There comes a point as one approaches retirement- that those investments should be getting much more conservative, as large market swings (2008- 40%) can occur in a short period of time-
Many of the readers on this site are likely not near approaching this age- and are understandably optimistic that they can successfully "succeed" in trading- but perhaps they should consider that the trading business is going to hold periods of -perhaps wide fluctuations- and- taking some of those profits- or new assets- and applying them into a Plan B separate approach to long term financial security is worth consideration.
i will use myself as an example- While i had periods of both winning and losing trades over the many past years- I have found- for many personal reasons- that I lack consistency in my trading-
Had i continued to support my trading- I might have simply taken progressively larger position sizes - with the end result that I had contributed much more to the market-
Fortunately- i had a Plan B with an employer's 401k , and separate Roth contributions that i did not apply as I do in my trading account- Those accounts continued to consistently grow-
Simply went into mostly all-cash in them this past 1 year.
I'm mentioning this because- as the song says- "just blink" and 20 years goes by.
Back in 2,000, i thought trading was the lottery path to a secure financial future-
Glad i kept the Day Job! Sadly- perhaps i lacked many of the combination of traits that are required to be a trading success over anything but in trending bull markets.
Back in 2000 i made what was a lot of money for me- and gave it all back with Interest!
I had- at that time- no other plan B because just trading appeared to be all i needed for the future i desired. I don't want to be too negative here- just passing on a cautionary note to those that are overly optimistic that their trading success is just a matter of time-
Summing this up- The Financial adviser informs me that 49% of American's have Nothing
saved for their retirement- That Social Security for working Americans will barely keep you at the poverty level if you have nothing else to rely on- nothing else saved- or invested- and -Thanks to improvements in Healthcare- the average Male will live to age 83- women a few years longer.
Tough to plan early on in life for the ending years of your life- but starting early- with the
8th wonder of the world- compounding on your investment dollars over decades- will surprise you - but you have to be willing to start. Even if it's small at 1st- Tough to do if you're scrambling to put 2 k into a trading account to build your future. But, we all have to make a start somewheres- Plan B -worth your consideration.
I will eventually share what the Fiduciary Adviser I see tomorrow suggests- I think sharing that perspective may be informative- but i will try to focus on the trading account on this thread-
2016 looks to be shaping up to be a challenging year!
Should we get a China rally tonight- and following US market rally Friday- it will likely be worth taking a short position on any rally-Just my Bias-
Adviser cancelled the appointment due to catching the flu- postponed it for another 1 week-As he refers to himself as acting as a "Fiduciary" means he ideally is putting my best interests ahead of his own- an example would be recommending low cost no load investments as opposed to similar load investments where he gets a back door commission from .
Comparing where my retirement monies are now- through the employer sponsored plan-
Edward jones manages the account, and the offerings within the account are mostly those available through American Funds- and while the account is no longer charged a load fee (due to the combined net value of all of the company contributors) the individual would be charged a 5.75% load, and the expense ratios are not listed as less than 1%- some .66
Vanguard has similar funds with an ER of .09- .25- And there are perhaps undisclosed fees 12-b-1 may be included in the ER- and perhaps it is seperate.
Another individual with another company had a similar company sponsored fund -also with American Funds- and when we reviewed his Share type - it was not a class A - but some other designation- like - H - and his Expense ratio was 1.35% and who knows what the 12-b-1 fees might have been. Since many -like my friend- do not want to get involved in what seems a confusing financial arena they have been told they need to trust in , they want to trust the "professionals" to guide their asset contributions so they will have a profitable retirement nest egg waiting for them. Most would be surprised to learn that even if their accounts go down and they "lose money" in a year or two or three- their plan executors continue to charge them the same fees- and the funds they are invested in also collect all of their fees as well- even if these funds declined in value. "Fees" are what keeps these funds in business- even when they are not providing exceptional or winning results-
Another misconception- that somehow the professionals are "watching" over your account- and will protect you from a substantial market decline- They get paid regardless-
It is not in their best interests to put an individual in conservative lower cost positions.
The EJ manager actually called me last January - very concerned that I had moved my investments into a substantial % in cash. I explained that the market was considered to be mostly fully valued- and that the greater Risk was not that I would miss out on a big upside move- but that i felt that the Risk was to the downside- He was not concerned about my missing out- He was concerned because he was unable to charge my account the higher fees
that are their bread and butter. I also mentioned i was considering shifting into some low cost ETF's. He has not called me back since.
I wanted to mention this aspect to those that indeed have monies in a retirement account-
Be aware- and Wary of the total fees that you are being charged- Aside from getting the % the employer will match - that is free money and an immediate return on your investment- consider the remainder of Plan B might be aside from the employer's plan and his adviser-
Those fees could eat 25-40% of your long term investment value-while not delivering higher returns. Before paying higher commissions for par or sub par results- compare your investment positions with the broker's recommended companies performance- and compare to a low cost comparative investment- like Vanguard-
How does one get to plan for a decades away retirement? Raising a family? Paying a mortgage? Paying too much in college debt? Car loans? Car repairs? OOOH- I almost forgot- the friendly credit card debt- just kept growing slowly- OUCH!
That retirement date is coming up- but superceded by Life's many other financial demands .
I'll just make all of these debts disappear with my trading gains!
I'm not making Fun of anyone- As I've been there and done most of all of these things that upset the financial apple cart. Including opening the credit card bill and realizing that the debt was not $1500.00 but held an additional 0 - $15,000.00 Had i set aside a Plan B 20 or 30 years earlier- the impact of those life learning experiences would not have been quite as traumatic. Fortunately these things occurred as I was younger and was able to use these
as stepping stones to a different life style./but only in the past 14 years. Late in life.
Had i started on a more responsible path- Earlier - and larger focus- and took a greater responsibility to consider financial planning as something that would become a large focus later in life-I would be in a better place- by far- for today's reality.
Perhaps at age 30 - planning the Family- by 40- Kids are here-By 50-Kids are starting to leave- By 60- Honey- it's you and me- By 65- Oh Shit- what are we doing still paying for the college education consummated that night 22 years ago at 7.5% interest?
Honey- what do we have left to put towards next week's retirement?
Let's call the Kids - maybe they can HELP!.
NO Joke- Blink and it arrives -much faster than anyone envisions.,
So- Consider that if you are 20 you totally ignore anything I've even considered here-
If you are 30 - you might be able to relate - After all- that expensive degree with the very high funded interest rate and the inability to find the job to pay it off in 4 years......maybe 15 or 20 years-
and if you are 40- The loves of your life Need to have the benefits-and opportunities you can provide-as they grow and develop into individuals headed into their own future- You did your best.....and college is their greatest opportunity- and the great debt medallion hung around your and their throats- perhaps this occurs when you are in your 50's?
And once that life experience of taking on ever greater life responsibilities starts to subside-
you look at the person that has shared these pAst decades with you- and you realize it is time for You and I.... Aside from memories - Of what We have done and accomplished together- What lies ahead???? What did we plan for? What was plan B? Were we too busy
in Life to plan for Plan B? In the end - it will be You and I- It has always been You and i.
So- a touch of Introspection I'm willing to share - Life does not always proceed as we expect.
Good stopping point on a website that the focus is not decades long-or years long- but i thought it was worth mentioning . As Traders- and also as Investors- I think it is important that one keeps a view of the Forest- the larger picture - presently looks negative.,
The more Nimble traders will adapt & position themselves to respond to the market's reactions. Some will guess right- some will guess wrong- based on a day's outcome.
