Yeah OK good point. knowing what your doing and having a well thought out plan should give you the confidence to have bigger positions. Just seems like his building his own more expensive version of an ETF thats all.
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Position Trading - getting comfortable with size?
- Thread starter smili
- Start date
no kidding, you start adding you end up with an etf, or eventually S&P 500, with all the risk and none of the diversityYeah OK good point. knowing what your doing and having a well thought out plan should give you the confidence to have bigger positions. Just seems like his building his own more expensive version of an ETF thats all.
but getting back to the Swiss Axioms, it's something an individual trader can do if he has no shareholders to answer to other than himself.
maybe five to seven ideas, and no problem holding cash which can be used at any time, especially during drawdown like the dry powder it was invented to be.
keep 50% in the index and see if you are one of the greats who can out perform
maybe five to seven ideas, and no problem holding cash which can be used at any time, especially during drawdown like the dry powder it was invented to be.
keep 50% in the index and see if you are one of the greats who can out perform
if you are a trader, that is your chosen profession, and you should and must beat the index, just like if you had chosen to own a hardware store or restaurant. But it is hard work and requires showing up every day with no vacation. And the idea is to get all that actively managed money into passively managed money for your old age.
the question is a good one, it's nothing new, but just the age old debate
the better question is "How old are you?"
cash, where is it coming from?
Thanks for comments
I'm age 44, semi-retired. What we have is what's been saved/invested from a corporate jobs. We live pretty frugally and feel like we have enough saved for retirement. No debt. Cash-flow for day to day living is adequate (wife is a writer so that's most of income currently), though not extravagant. We're in process of downsizing from a home that is too big to also help lower our expense profile. I could go back to corporate if needed, but trying to start something new. We live pretty simply and don't need much.
Cut the story short, but if you are not comfortable with 5% of your account allocated to a single stock investment times a 30% loss = 1.5% loss of your account then you should stop trading and stop investing. It means that you should put your investment into highly rated sovereign government bonds. 30% constitutes a large 1-day loss and I chose 30% arbitrarily but nonetheless it would represent a large unexpected loss. Your account would be negatively affected by 1.5% if you allocated 5% of your resources into such stock. If that is too much risk for you I highly recommend you to stay away from investing and particularly trading in stocks and rather allocate a large portion or everything into fixed income securities of high credit.
Simple as that, end of story.
volpunter, thanks for comment.
The reason I ask the question is for tips on becoming comfortable with size.
To be clear, I've experienced large losses in individual securities. Gut punches. I understand the feeling. I don't like it. But loosing 30% of a $60K position feels very different to me than losing 30% of a $15K position, if that makes sense. I almost don't even take note of the latter and obsess over the former. I realize loses can easily exceed 30%, especially in bears like 2000-2003 and 2007-2009 markets. I will be wrong. Big losses will happen (I'm trying to be more careful about risk now than I was when I was younger - but I realize mistakes will happen).
Tips for how to handle this odd situation where the increased size of portfolio changes the way I think about the investments. I know on % terms the size shouldn't matter, but in the decision making process it seems to matter.
there is a book written a while ago called "The Swiss Axioms" which discusses this very subject, and the gist of it is a life devoted to about 5 to 7 investing ideas, usually stocks
it's not for the fainthearted
and being a commodity trader for a living, I am very "fainthearted" when it comes to investing
Is the book by chance _The Zurich Axioms_ instead? I can't find _The Swiss Axioms_.
http://www.amazon.com/The-Zurich-Axioms-generations-bankers/dp/1897597495
I agree. You should only be trading at a size that you are comfortable with - if that's 50% then, you have to evaluate if that's enough or find something else to do.
Hi all, thanks for comments. I'm trying to get more comfortable with size, and tips on becoming more comfortable are appreciated.
Just to clarify. I'm not really a trader in the sense of most on the site. I don't get up every day and trade. I mostly read and work on models. The # of investment decisions are not high, and holding periods are more often 1+yr instead than they are months.
If you are uncertain about alpha ability then you probably not doing it so i would just ETFs.
Ok you dont want to use leverage, fine but it cuts down your choice of strategies.
For bonds check our short term corporates. They are not the same as long term sovreign debt and behave very differently.
I appreciate the suggestion. I'll investigate and study their behavior.
Do you have a preferred vehicle for short term corporates? Something like VCSH etf?
https://personal.vanguard.com/us/funds/snapshot?FundId=3145&FundIntExt=INT