One more double = retirement

J

Jakobsberg

Brief bio - I’ve been buying and selling stocks since the late 1990’s but only started to take it seriously

around 2007. Read all the classic investment and trader books since then. At the time I thought it

was a terrible time to start, just before the financial crisis, but in hindsight perhaps there was not

a better time to find out your risk tolerance and get first hand experience of what the market can

throw at you. Must be better finding out when your account is small than just before retirement

right?

I set up a “proper” trading account in early Jan 2013 with ability to buy international stock, options,

warrants, IPOs etc etc. The equity curve from this is below. As you can probably guess I’ve been long

but not extreme leverage and will say more in another post.

So why am I writing this?

- As part of a process to take this more seriously and document what I am doing. Basically I

need one more double to have enough funds to retire. Not that I probably will retire, but

its nice to have the option, and select jobs based on location and interest rather than the

paycheck.

- To throw out some ideas and get some feedback on them. Its not like there is a special secret

to what I’m doing and I don’t take positions in small companies so don’t see a problem

publishing it here.

- I have been reading lots of threads over the past few weeks and there don’t seem to be

many on long term position / swing trades which is my thing.

Hope some others also find it useful.
 
Nice gift from the Swedish central bank today. Rates all the way down to 0.25% from 0.75%. Expectations were for 0.5%.

Swedish stocks up and my borrowing costs down :)

Forgot to add earlier that another reason for doing this is that family/friends ask what im doing - will just send them this link.
 
Almost the end of the week and up ca 100,000 SEK which brings the net account total (after credit) to a new high of 3,250,000 SEK. For those using colonial currency this is about 475,000 USD.

Current holdings are in the file below. Without knowing the strategy, which I will write about later, this really isnt going to mean much but Im posting it for myself as reference.
 
So what caused the equity curve to look like that?
Buying when blood on the street (including mine).
- Euro crisis – Started x3 long positions on EuroStoxx50 in the summer of 2012. Bought because the valuation gap between similar large US corporates was large. Global corporates were getting hit because their HQs were in the EU rather than US which didn’t make sense to me. Sold these positions two months ago which was probably a bit early. Need to get use to letting profits run a bit more.
- Russian crisis – Started position in RDX when the PE got to crazy low levels <5 and >5% dividend yield. If you look at the chart there are 2 bottoms. After the first one I started pyramiding into it but had to exit at breakeven point during the next dip. Second bottom was higher than first so started pyramiding again. When doubled I look out the original stake and letting profits ride now.
Buying the dips
- Originally started buying a set amount on every 5% drop e.g. 100,000 on 5%, 200,000 on 10%, 300,000 on 15% etc. Made money doing this, especially in the dip of summer 2013 but was hard to do psychologically. Did some backtesting to find the % and amount levels I was comfortable with.
- Changed method to now try to pick bottom with small highly leveraged (x20) stake and start pyramiding into the relief rally. Exit if falls back to breakeven point. I previously sold out all the position when market returned to pre-dip level. In the future will try to force myself to sell original stake and let the profits run.
Maintain long position
- Well it’s a bull market after all, so my leverage has always been at least 1.
Selling covered calls
- When the market has been at new highs I have sold puts against half my long position. Strike price ca 2% above the market with one month duration. Most of the time these have made money, some at breakeven and a few small losses which I have not minded as overall up from the long position. If they make money quickly I often buy them back and resell if index goes higher. Otherwise hold to expiry. Started doing this at since Jan 2014 and it may add another percent or two by doing by the end of the year.
Fixed income
- I can borrow at a low rate from my broker (ca 2.8%) so take advantage of that and buy fixed income or preference shares and aim for a spread of 3 to 4%. This adds a couple of percentage points per year to the overall portfolio. Currently buying EU high yield debt and emerging market debt.
 
actionzip54 said:
Also seems like you want to do the happy dance right now. Anytime you feel like that you should start taking profits, quickly.
More...

Bingo. Every time you feel euphoric, take profits and reduce your size, IMO.

If based on your recent performance, you're 1 year away from your number needed to retire, why not reduce your risk. Put half of your money into a very conservatively balanced portfolio that is heavy on short term government bonds or cash and push your time frame to 2-3 years instead?
 
actionzip54 - Thanks for the reminder!

Sure buying every dip is dangerous because at some point it wont come back. But the reason for buying in mid 2013 was because the earning reports were coming in good whilst the market was going down.
Its also not a blind buy the dip strategy but the amount and level set such that I could survive another 50% drawdown which does not happen often. Twice in 10 years was exceptional. Big drawdowns only tend to occur with recessions and based on data such as attached it is not likely anytime soon. Once those curves head south then yeah you dont want to buy the dip and if you have already started then get out.

Will post the current holdings shortly from my other PC.
 
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