Investing General Discussion
- Thread starter Furious
- Start date
Gravel
Mr. Poopybutthole
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That's an easy trap to fall into. You think "surely the market can't go up anymore" and then you're wrong for 2 years in a row and even though on year 3 it pulls back 20% in a bear, you're behind because you missed the massive run up to it.
That's why time in the market beats timing the market. Unless you need the money in the next 5 years, or if you're looking to day trade, just throw it all in now.
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Synj
Dystopian Dreamer
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Sheriff Cad
scientia potentia est
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Blazin
Creative Title
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Most of the time the market is at highs, it's rare for it not to be, so avoiding buying highs is a lot of avoiding. That's easy to say, the price of most goods only go up but as consumers we still like a "deal" more than paying what we view as a high price. Right now the earnings yield of the S&P less the 10yr yield is negative. That's often not good for forward returns, however that condition can be fixed without the market going down.
Historically, the math says lump sum on any given day/level has the highest probability of performance. Math ignores human emotion which should at least be acknowledged. Dip buying reduces the likelihood of significant drawn down from cost, DCA also helps with this. Lump summing requires accepting the stress of being down 10% 4 weeks later and how an investor might respond to that scenario.
Nobody can make this decision for someone else. It normally is a battle between the fear of missing out vs the fear of losing.
...Now after I wrote that I see you said 30k not 300k, da fuq just invest it. The market crashes and your down a few k? There is a reason my son's account is my top performing account every year, there is no downside. Even at entry level service job we are talking about less than a years wages that means you need it to grow and that means it needs to be in harms way. Now if someone says what should I do with 20 years of wages amount and I'm 50? That's a different question.
Historically, the math says lump sum on any given day/level has the highest probability of performance. Math ignores human emotion which should at least be acknowledged. Dip buying reduces the likelihood of significant drawn down from cost, DCA also helps with this. Lump summing requires accepting the stress of being down 10% 4 weeks later and how an investor might respond to that scenario.
Nobody can make this decision for someone else. It normally is a battle between the fear of missing out vs the fear of losing.
...Now after I wrote that I see you said 30k not 300k, da fuq just invest it. The market crashes and your down a few k? There is a reason my son's account is my top performing account every year, there is no downside. Even at entry level service job we are talking about less than a years wages that means you need it to grow and that means it needs to be in harms way. Now if someone says what should I do with 20 years of wages amount and I'm 50? That's a different question.
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Blazin
Creative Title
- 7,681
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I'll pay a penance for my f up and explain a spread trade. In this case it was a vertical put spread. Spreads can be bullish or bearish depending on the strike you buy and the strike you sell. In this example I sold the $691 put and I bought the $692. The net difference between the two was $0.20 and I did 20 contracts so that means the trade cost me $400. That's my max loss. Because the strikes are $1 apart max gain is calculated by the spread difference x size - entry cost. So $1*2000-$400= for a Max profit of $1,600.00 You achieve max profit at any price equal to or below the sold put, so in this instance this trade pays out max sub <+ $691.
Using options in this way I can take a defined risk for a small amount of capital. Would have been nearly $500,000 in shares to accomplish the exact same trade AND my potential loss would be 100%.
It's possible to flip it and do a credit trade and use a put to be bullish, normally when I want to take a bullish or bearish spread I stick to the debit trade and use calls for bullish and puts for bearish. If you aren't familiar with options this probably is all gibberish, but I like to share how you can use options to limit your risk. There is a misconception that options are inherently "riskier" and that is not true it's more about how you use them.
Using options in this way I can take a defined risk for a small amount of capital. Would have been nearly $500,000 in shares to accomplish the exact same trade AND my potential loss would be 100%.
It's possible to flip it and do a credit trade and use a put to be bullish, normally when I want to take a bullish or bearish spread I stick to the debit trade and use calls for bullish and puts for bearish. If you aren't familiar with options this probably is all gibberish, but I like to share how you can use options to limit your risk. There is a misconception that options are inherently "riskier" and that is not true it's more about how you use them.
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Rangoth
Vyemm Raider
- 2,256
- 2,553
I have this same problem and I have not really gotten better at it
especially on shorter dte options trade which I do often, it’s super easy to be up 5% from small movements and spreads alone. My “gut” would tell me let it run only for it to drop to -5% and then I’d end up taking a loss or holding it way longer than I intended
I started removing emotion and putting in trailing stops or conditional stops based on underlying. In a sense it worked! My loss rate went way down but the size of my wins shrunk too as I continue to struggle with how much room I give things to bounce. SPY or other high option volume tickers tend to do better, but on anything light in option volume or with lower attention my stops get hit immediately.
I keep telling myself that 3-10% wins with the occasional 20% are better than losses but there are times(maybe 25% of time?) where if I row out the turmoil my 7% gain could have been 40%
FYI as blazin said this is an options problem. With pure shares the movement doesn’t tend to be as rash and you can use guidance of minute or day ATR and DMA to take pretty good guesses at trailing sell ranges. Options fluctuate so damn fast I find it impossible to do anything other than just take profit
For those that done trade options often there could be a .50-.80 spread on a 2 month out call on some random stock. I might land a buy at .65 so even a 50cent move now allows me to sell at 70/75 cents.
if I take that it’s a solid win in under 2-3 days. If I “let it ride” the underlying may loiter in a range for 1-2 weeks and I may break even. Used to happen to me all the time before I started setting my trailing sell at the time of purchase, again removing emotion.
edit: I absolutely love spreads. I often do far OTM bull and bear spreads for well defined 5-7% trade goals with defined risk. Theta is on my side instead of against it!
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Blazin
Creative Title
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It's a problem I bitch about but ultimately it's rule following for me. The trade had already been given a little room to go red, once I was back green the rule goes into effect that a red->green->red flip is not allowed. The reason I use this rule is that in these circumstances usually means the entry was suboptimal and once that has been seen to be true I don't use hope to try to correct my error.I have this same problem and I have not really gotten better at it
especially on shorter dte options trade which I do often, it’s super easy to be up 5% from small movements and spreads alone. My “gut” would tell me let it run only for it to drop to -5% and then I’d end up taking a loss or holding it way longer than I intended
I started removing emotion and putting in trailing stops or conditional stops based on underlying. In a sense it worked! My loss rate went way down but the size of my wins shrunk too as I continue to struggle with how much room I give things to bounce. SPY or other high option volume tickers tend to do better, but on anything light in option volume or with lower attention my stops get hit immediately.
I keep telling myself that 3-10% wins with the occasional 20% are better than losses but there are times(maybe 25% of time?) where if I row out the turmoil my 7% gain could have been 40%
FYI as blazin said this is an options problem. With pure shares the movement doesn’t tend to be as rash and you can use guidance of minute or day ATR and DMA to take pretty good guesses at trailing sell ranges. Options fluctuate so damn fast I find it impossible to do anything other than just take profit
For those that done trade options often there could be a .50-.80 spread on a 2 month out call on some random stock. I might land a buy at .65 so even a 50cent move now allows me to sell at 70/75 cents.
if I take that it’s a solid win in under 2-3 days. If I “let it ride” the underlying may loiter in a range for 1-2 weeks and I may break even. Used to happen to me all the time before I started setting my trailing sell at the time of purchase, again removing emotion.
edit: I absolutely love spreads. I often do far OTM bull and bear spreads for well defined 5-7% trade goals with defined risk. Theta is on my side instead of against it!
There is some leeway, in that I will allow a 0dte spread to go to zero, but would have to establish that prior to entry not as a post entry cope.
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Tmac
Adventurer
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Blazin
Creative Title
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Kithani
Blackwing Lair Raider
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Hello sir it is me your long lost cousin, prince Abu Jabubudu, crown prince of majestical Nigeria…
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Starting an investment account for my newborn. The plan is 50$ a month into the account until he hits 18. ChatGPT advised to just keep putting the money into Fidelity Freedom® Index 2045 Fund (FIOFX), basically set it and forget it. This would be separate from his college investment and to be used for a car or living expenses when he turns 18. Any advice?
Kithani
Blackwing Lair Raider
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If I were truly doing an account for my infant I probably wouldn’t use target date and just go full SP500 or VTI and let it compound for 50 years or whatever but I’m probably just going to cashflow a car when they’re 18
I guess the question is are you really doing it for them or is it YOUR way of slowly saving up to buy your kid a car? I think either approach is admirable but target date makes more sense to me for the latter
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Yep: do the same thing but with the equivalent (or nearly) of Silver. A coin or small bar or something.
Assuming you can still get such things...