Do you do a lot of investing yourselves?

Etienne, How do you take into account the compliance requirements in your position? To buy and sell on awhim seems like it would be difficult for me because I’m supposed to check with my compliance officer and inform him of any trading in my personal account. My personal account is also subject to audit at anytime. How do you deal with that - does anyone else have this challenge?

Out of the money options, all in. :wink: Why go for a downpayment if you can pay off the house, in cash

SomewhatDamaged Wrote: ------------------------------------------------------- > I can’t disagree with anything you guys have said > and appreciate the constructive feedback. > > I guess I want to get some sort of exposure to the > markets for myself instead of what I do at work. > Whatever I will be putting in won’t be a large > enough sum to make me lose sleep at night, but I > guess it could ruffle some feathers. > > I’m willing to stomach a bit of a loss as I do > understand the risks involved. > > At the same time, it’s not like I’m going to be > investing in penny stocks. > > All that being said, I’ll probably chicken out and > just hold everything in the cash account. Hey SD. If you are just looking to get your feet wet with little money, I suggest you spend time learning technical analysis. While you learn t/a, paper trade some at places like investopedia. Then if you want to throw some money in (an amount that would not hurt if you lose)…do some modest sector specific fundamental analysis keeping in mind the macro backdrop and trade individual equities based on t/a within that/those sector(s). Good Luck.

viktorv Wrote: ------------------------------------------------------- > does anyone think china will finally change to a > free float this year? I think China will make its currency fully convertible until it develops a very strong internal consumer market. I think they keep their currency artificially low to create more jobs and hence keep people employed and not think about overthrowing the Commie regime. So to your question, I would say no and it won’t happen in the next few years either.

If we’re talking about paper money, picking winner, technical analysis and all this great stuff. Maybe you can get your hands on one of those standard Excel spresdsheets and convince yourself that your doing something very analytical and very valuable and that your smarter than everybody else. Works very well if you’re flexible about the condo downpayment in a year.

Yes I do… I use mechanical trading system… basically short term trend following system… along with a countertrend based on the same principle… and a volatility expansion system… I dont really pay attention to the underlying instrument… I only try to diversify my portfollio… that works well…

ymc Wrote: ------------------------------------------------------- > > I think China will make its currency fully > convertible until it develops a very strong > internal consumer market. I think they keep their > currency artificially low to create more jobs and > hence keep people employed and not think about > overthrowing the Commie regime. > > So to your question, I would say no and it won’t > happen in the next few years either. you are right about the protection, but you gotta think about how long they can keep this 1.4 trillion surplus w/o hurting their economy though, if they dump their money anywhere the inflation can skyrocket

Ah, what a bunch of sissies on this board. The only way to learn about investing is by doing it. It is important to understand the basics but at some point, you are going to have to wade in and and see if you can swim and what that feels like. I guarantee the CFAI chapters on portfolio management will suddenly spring to life for you. One year is a reasonably long time horizon and banks are reasonably safe investments to take on, I can’t see you losing more than 20 to 30 per cent (in a very bad case, btw) and the knowledge and experience you will gain will be invaluable. I am totally amazed to hear the snickering on this forum - and you guys are hoping to be equity portfolio managers? E.g. the dumbkopf above that likens investing in banks for a year to investing all your capital in out of money options. He’s probably a dutiful student with thick glasses, still begging mom to buy him a newer laptop because it will help him pass yet another certification. Like I said = a bunch of sissies. Give this guy a break, he’s trying to DO what CFAI teaches you to DO.

FourCastles: Agree with you about the “snickering”… This should be a place where people feel free to ask questions and get respectful answers. Yes, it gets annoying to hear “should I do CFA” for the zillionth time, but it’s ok to refer people elsewhere. Most of us are fairly early on in this stuff and don’t deserve the kind of subtle or not-so-subtle put-downs that occasionally fly here. SomewhatDamaged: Generally, in financial planning, you want to model your anticipated liabilities (i.e. your condo payment, your retirement, possible emergency fund, etc.) and keep monies dedicated to them in very safe investments (i.e. *not* equities, and possibly not even bonds, other than treasuries). So, if you are saving up for a condo in the short term, it’s probably not a good idea to put the money into anything equity like. I assume that you’re considering putting those funds into equities (either stocks or indices), because it would be nice to have it grow so that you’d have more when it comes to down payment time. It is true that equities have outperformed fixed income and treasuries on average over the last 100+ years in the US, but to benefit from that average (assuming that it is stable, though there are theoretical reasons to assume that equities should outperform over long time periods), you need to have longer holding periods, and one year is almost certainly not long enough. I think one is talking a minimum of 5 years and probably more like 10 years to benefit from that higher historical average. Also realize that we’re in a moment when the short term outlook on equities is not very rosy, so you have a higher-than-average chance of *losing* money in equities over the next year than normal. This is probably why you are getting some snickers from the peanut gallery - not only is it probably a bad idea in general to put this kind of short term stuff in equities, the short term outlook on equities is bad, so going long on index funds seems counterproductive. There are two circumstances where it might make some sense to put some of those funds in not-so-conservative stuff: 1) How “hard” is your liability? For example… if you don’t have enough for a down payment in one years’ time, is that a serious problem for you, or just a disappointment meaning that you will try again later. If the latter, you *might* be able to put a portion of your savings into equities and just keep fingers crossed that things work out for you. If the former, then stay more conservative, because you really are getting closer to speculating than genuine investing if you do that. It’s ok to speculate - just a) be conscious that you’re doing it, and b) don’t speculate with money you can’t afford to lose. 2) Are you considering investing in something correlated with what you are saving for (or negatively correlated with it)? If so, that does reduce your risk, perhaps enough to warrant investing in it instead of cash. One thing you might consider is housing futures based on the Case-Schiller index of home prices. I think these are available on the Chicago Mercantile Exchange, and basically they track the median home price in about 10 different US Cities. The price will rise and fall roughly in line with average home prices, allowing you to essentially purchase a portion of an “average” home today at today’s prices. This is especially useful when home prices are rising rapidly and you are worried about them racing away from you. Just remember that these are futures, and so if you wanted to do this, you would only want about 5% of your savings in them, if that. Also the current outlook on real estate is not all that great, so you still might do better to have your money in cash right now. And, these futures are relatively new, and therefore not all that liquid - you might find that small amounts have sizable losses from transaction costs. Still, the idea of investing in an asset correlated with your liabilities is not as risky as just going long an equity index. Hope this helps

One final point on the housing futures stuff (I don’t want to understate the hidden risks there). The Case-Schiller index tracks the median single family home price in about 10 US cities. So if you aren’t buying a single family home (you said a condominium, I remember), or you aren’t buying a median-type home (you want to live in a higher end community, maybe), or you aren’t buying in one of the cities that the index tracks (i.e. none of these indices really applies to your area), or a number of other small things you’d have to think through, the index may not track what you want to buy well enough. This means that although the housing future is less risky than an equity index future, it is not a perfectly matched hedge. The fact that it is not perfectly matched suggests that you’d want less of it than you would if it were perfectly matched. (if you can actually model the degree of mismatch and somehow compensate for it, there’s a small chance you might want increase your exposure to the future, but that’s pretty complicated and probably beyond most of us here) (sorry to go on so long… I’ll keep my posts shorter in the future)

bchadwick: good posts, keep them long in the future as well :slight_smile: SD: banking stocks might be something to look at right now, they are cheap relative to the past few years. However, the worst may not be over for them yet - first, some banks may still have skeletons in their closets, for instance exposures to subprime that are hedged with counterparties that will suffer down the road from the subprime themselves. Secondly, the liquidity issues seem to persist and sooner or later, this may affect the results of banks. Having said that, I like buy stocks not when they are still falling down but shortly after they have bottomed out - I would wait until the banking sector begins to show signs of improvement. I may miss out on the absolute bottom but it is safer that way. Secondly, I would buy a diversified portfolio not an individual bank, perhaps a banking index, to avoid buying a bank that will turn out to be stinker. The danger of individual blowups is still there, i think. I would probably try to pick banks with strong retail operations and relatively light investment banking side. The strong retail side will represent a cushion against any investment losses and or liquidity issues. And finally, for my personal taste, the banks do not offer enough of an upside given the risk inherent in them at the moment but I may be wrong in this. I tend to look for potential home run stocks as opposed to steady performers, so I may be biased.

Onegin Wrote: ------------------------------------------------------- > Etienne, > > How do you take into account the compliance > requirements in your position? To buy and sell on > awhim seems like it would be difficult for me > because I’m supposed to check with my compliance > officer and inform him of any trading in my > personal account. My personal account is also > subject to audit at anytime. How do you deal with > that - does anyone else have this challenge? Usually compliance should give u clearnace the same day…but It is still a pain in the ass, i’m in ER at BS shop. Our blackout periods are so long that i have been blocked out of many good exit/entry points. Since then i have started to research names outside my coverage universe. Usually consisting of smaller names that cant be owned by the funds, i suppose that is not too feasible for you, however you could consider owning some etfs, they give you exposure, r not time consuming, and u wont get blacked out. Hope this helps…

bchadwick, Excellent posts, but I am not sure if the house down payment is a liability in his case, it’s more like a short-term liquidity constraint. One thing he could do to make sure he has the cash for his down payment while taking a shot at equity investing, is to put 90% of his money in some investment grade bond (or a bond ETF like AGG for example) that will pay him about 10% in one year, and take the 10% left and buy S&P Call option expiring in one year. He’s “guaranteed” to have the cash in one year and might benefit if he guesses right on the equity market. HSBC sells a similar product but with high fees and minimum holding of 5 years. But there is no reason why he can’t do it himself for free. bchadwick Wrote: ------------------------------------------------------- > One final point on the housing futures stuff (I > don’t want to understate the hidden risks there). > The Case-Schiller index tracks the median single > family home price in about 10 US cities. So if > you aren’t buying a single family home (you said a > condominium, I remember), or you aren’t buying a > median-type home (you want to live in a higher end > community, maybe), or you aren’t buying in one of > the cities that the index tracks (i.e. none of > these indices really applies to your area), or a > number of other small things you’d have to think > through, the index may not track what you want to > buy well enough. This means that although the > housing future is less risky than an equity index > future, it is not a perfectly matched hedge. > > The fact that it is not perfectly matched suggests > that you’d want less of it than you would if it > were perfectly matched. (if you can actually > model the degree of mismatch and somehow > compensate for it, there’s a small chance you > might want increase your exposure to the future, > but that’s pretty complicated and probably beyond > most of us here) > > (sorry to go on so long… I’ll keep my posts > shorter in the future)

FourCastles Wrote: ------------------------------------------------------- However, the worst may not be over for them > yet - first, some banks may still have skeletons > in their closets, for instance exposures to > subprime that are hedged with counterparties that > will suffer down the road from the subprime > themselves no kidding, think about all of the CDS taken out

I have a couch potato portfolio of mutual funds and ETFs.

Who tries to do market timing around here?

Market timing? I tend to play santa claus rallies and the following small cap/tax loss rally… just by having more equity exposure than I would normally have. It is usually profitable so I guess I just keep doing it.

I try to do some market timing. Since I like to pick volatile stocks, I will buy and hold with half of my target position, and do market timing (sell on what I think are highs and buy on lows) with the other half. It happens a lot that I miss badly, sell just to see the stock take off or buy and see it go even lower. That’s why I do it with one half of the position only.

Buddha - Thank you! I think ETFs are probably going to be the way to go…

Anyone have any opinion on these alternative energy ETFs I’ve been looking at GEX and PBW. Have they runup too high to get in this late? I think they are a great long-term look (5-10 yr range) since it is the wave of the future. Just wondering what people think of now as an entry point.