mark
fire starter
Posts: 1,575
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Post by mark on Jan 6, 2015 21:05:48 GMT -8
Earlier today, AAPL was down ~12% from its peak. So the question is, how can we tell if a 12% decline is the start of "a slide like 2008 & 2013" or if it's something else? This goes back to the utility part. Even if I could time trades on a 12% move, I would not bother to do it. The only way I will sell AAPL is when I peel off a few shares now and then to fund a major purchase. Other than that, I'll leave it to my children. Given that, a 12% move is just noise.Ah, but it's a wonderful noise that I use for profit! Whenever the stock drops (and usually I prefer a larger drop than 12%), I purchase LEAP bull call spreads. Just relatively conservative ones, for example today near the low, my order for [additional] Jan '17 90-110 BCS was triggered. I consider that to be pretty conservative and it should yield about 100-115% over something less than two years. I've been doing this repeatedly for the last few years and it's only failed once because the drop in AAPL lasted a bit too long. Of course, I also have a hefty core position of common shares that I rarely trade (except rarely for tax purposes).
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mark
fire starter
Posts: 1,575
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Post by mark on Jan 6, 2015 21:26:10 GMT -8
I have some strong opinions about this diversification topic, but frankly, between a power hike today in 85-degree SoCal weather (ha ha!), and being a little hungover, I'm just too F-ing tired. Short version: Diversification of stocks is a canard made up by fund managers to justify their godlike salaries and very existence. It's bullshit. Here's a great article on it: How Concentrated Should You Make Your Value Portfolio?Obviously, you need to pick the right 1-5 stocks. But just holding AAPL and IBM (with dividends reinvested) for 20+ years, my portfolio has outperformed any hedgie. I was thinking today that I wish this topic has been discussed a few weeks ago. I thought we should come up with a script to randomly assign 5 Dow 30 stocks to each AFB member, and let each member also pick 5, and then compare the YoY results to the Dow 30 Index and mutual funds/hedgies. I'll bet even the randomly assigned ones would beat most funds. Anyway, that's way more than I wanted to write tonight. I think I will go feed my dog and then go buy some more beer. Good article. But what's an old codger like you (and me) doing reading a blog for millennials? I also find fund managers to be generally useless and am burned up by the fact that I have no choice but to entrust my 401(k) to their ripoff service. But there's another MUCH more important reason why individuals can't own a large diversified group of individual stocks - that's because it is impossible to stay on top of them and research them properly. Just look how much material there is to read about Apple each day/week/month/quarter, now try adding 9 more of those and you will very quickly be buried and won't do the job properly. Heck, just add some like Amazon, Tesla, Google, and Wal-Mart, and you'll already be buried with just 5. And forget about micro-caps ... just searching for the information will tire you out. Anyone who wants to own 20, 30, or 50 different stocks may as well just buy the indexes and use those as a proxy. Or if you think you are clever, buy sector ETFs and use those as a proxy.
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Post by BillH on Jan 6, 2015 21:43:47 GMT -8
Nice piece Mav. Enjoyed it.
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Post by firestorm on Jan 7, 2015 3:10:00 GMT -8
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