Category: buyStocks

recreational investing #w1r3

Posted on by tiger40490

limit order (rather than fractional) is part of tCost optimization.

My stock investing can be characterized as recreational_investing. Biggest risks are 1) sleep]peace, focus@work 2) mkt risk.

I feel the tension between two forces
* self-hate due to low $ROTI, low commitment amount… tolerable for recreational investing
* if I bet bigger, I hit high tcost (due diligence + babysit) and much higher market risk.

The most promising solution is bigger buy-n-forget, buy-n-hold for bigger dividend. I can also stick to recreational investing, and keep my portfolio NAV below $20k.

— ROTI .. as a metric is critical. The time must be time well-spent, in terms of

  • (Most of the benefits are related to retirement.)
  • brain stimulation (anti-aging), highest in stock-picking, lowest in mufu picking [1]
  • learning, self-growth, self-discovery
  • meaningful interaction with real people not automated programs [1]
  • pnl .. is usually below $3k, but can become 10k
  • joy.. I think many retirees use stock investing as a pastime. It’s their own money, not wasted on unhealthy activities.

Some retirees use recreational investing to fend off inflation, and build a small legacy for a grandchild. Could be as small as $5k, but it gives meaning to the effort. Meaning can be important to an otherwise meaning-lite recreation.

In contrast to roti, the ROI metric is less critical for a recreation [1].

— [1] discussions: single stocks far exceed funds
I have found far more online discussions of single stocks than funds.

In my chats with friends, fund investing is a shallower topic than stock-picking.

— risk capital i.e. money you can afford to lose. See blogpost on risk capital
— Pool size: perhaps 10->20-100k, depending on your family brbr, mtg/college and other obligations, dependable income, retirement time-frame,
— asset classes:

  • stocks; reputable funds; REIT fine but rEstate is not recreation 🙂
  • FX, gold, oil

risk rating: high-risk assets are welcome due to the small exposure.

ETF quickGrab: buy-low +! due diligence #@singleNames

Posted on by tiger40490

 

k_ETF_assetClass

— A related strategy: after a broad market crash or during a prolonged overall decline, buy broad ETFs (or sector ETFs)

Prefer high-dividend low-volatility ETFs (such as SPHD) .. really aim at defensive stocks. They tend to bleed less if the decline deepens.

Prefer quantum below $200, so I can use multiple small limit order and avoid stressful night session.

After a recovery, consider to reduce (or exit) the too-broad ETFs, because I prefer holding single-names. See ##when2sell stocks

— filtering ETFs available on Rbh
* criteria: expRatio ..
* criteria: div yield ..
* criteria: AUM > 1 bn
* criteria: price chart ..

There are many ETF-screener sites…

— SQG [SectorQuickGrab] .. my main strategy. If a specific sector is down but I have no specific stock pre-cleared and checked out (due diligence), then I would quickly buy a sector-specific ETF. In a few weeks, after I buy selected single stocks to gain the desired exposure, I will reduce or exit those ETFs to free up cash.

https://etfdb.com/etfs/industry/ shows close to 100 sectors

The correlation Assumption .. in a sector-wide decline, all major constituents decline. My (would-be) favorite single stock is likely one of the major constituents of the sector. If that stock drops 11%, then the sector ETF probably hit a similar drop. The quick grab is effective if that correlation is strong.

Biggest tracking error is expRatio. See note below.

— tip: Keep small positions in a large number of specific ETFs, so I know which “sector-ETF” are avilable.

  • perfer liquidity
  • prefer small quantum .. to support limit-buy. https://www.cnbc.com/sector-etfs/ shows prices of 50 common ones.
  • prefer 1) low expRatio and 2) higher div? LG2 I won’t hold it long term
  • need to ensure ETF contains at least 21 names
  • — the contenders
  • Utilities: XLU
  • energy (oil/gas): XLE, XOP, IYE
  • midstream:
  • rEstate: VNQ, IYR, DRW (blogpost)
  • Reit: see blogpost
  • telco: XTL
  • pharma:
  • biotech: IBB
  • banking:
  • tobacco:
  • Inet:
  • mining: XME
  • tourism:

Buffett@market timing: 2meanings

Posted on by tiger40490

k_babysit4exit

Disambiguation of “timing” — It can mean the strategic importance of AA) acquisition price, or BB) price forecast, including prediction of turning points using analytical or math methods.

No one disputes the importance of AA. BB is controversial.

I don’t know how Buffett perceive BB. Value investors are not supposed to time the market(BB). However, in a down turn, there are more bargain opportunities. See the book by Pauline Teo. In my experience, I can see that timing in AA sense (or random luck) is a major factor but there’s not much we can do about it[1], except obvious things like “avoid buying after a climb”.

  • Buffett (AA): “For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”
  • Buffett (BB): “In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.”
  • Buffett (BB): “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
  • [1] Buffett (BB): “If you like spending six to eight hours per week working on investments, do it. If you don’t, then DCA [ dollar-cost average ] into index funds.” — no timing please

[1] I can say the same about absorbency for financial numbers. This absorbency is not easy to train. If you don’t have this absorbency, then consider low-cost index funds.

— https://www.cnbc.com/2022/05/03/warren-buffett-why-you-should-navigate-not-predict-the-stock-market.html says

Buffett recommended against obsessing over finding(BB) a perfect time to buy a stock. Rather, the Berkshire Hathaway CEO said, go ahead and invest, and then observe the stock market over time to see if you should buy more of that company’s stock or sell it.

over-rely@eq analyst ratings@@ #w1r4

Posted on by tiger40490

Opening example: https://www.fool.com/investing/2020/12/28/scoop-up-10-highest-yielding-dividend-stocks-2020/ is a survey of 10 stocks, featuring many analyst prognoses. I think a lot of obvious signs are easily missed by casual observers but not by analysts. Analysts are paid to write research. I have a few ex-classmates paid pretty good salaries doing this research. I assume they have some evidence for their recommendations.

Most of the recommendations/reviews have a focus on overvalued/undervalued, over the medium term (I won’t specify how many years). This is not exactly my horizon, as I tend to buy-n-hold longer.

Site1: https://www.moneycrashers.com/stock-market-analyst-rating-accuracy/

— Quality concern: stale … Target price is more useful (in MOETF) than the rating, to feature on my blogpost titles. If a 100% BUY is given at price $97, before a surge to $152, then obviously the BUY rating is invalidated immediately.

Time horizon — Site1 says “analysts only follow 12-month time frames”. I think target audience often act on the recommendation and keep a position for years. However, Overpriced/Undervalued ratings are always tied to a price level, and loses relevance as soon as the stock experiences a big move. That’s presumably why 30 days later there will be a bunch of new research published for the same stock.

— Quality concern: selfish agenda .. Many online commentators accuse equity analysts of selfish bias, written to brainwash the lay public, for their self-interest (including indirect assistance to their paid clients). I think it’s valid suspicion and accusation. Site1 explains that analysts are more likely to rate a stock a buy than a sell. However, I want to hold a balanced view. In defense of the analysts I would point out

  • The analysis is a detailed writing, not a one-sentence stock tip.  There’s a track record to each analyst. If the equity analysis is all commercial propaganda then its track record would have discredited itself. Maybe it has happened, but I see that the mainstream news still cover them
  • Analysts are paid a high compensation, so there’s probably some evidence beneath their writing.
  • If there’s only one analyst, then I would suspect her motive. 9 analysts all have self-interests and would unlikely to give identical ratings. However, analyts in general tend to give Buy.
  • Do you have the same suspicion over Buffett’s pick?
  • Site1 says A) analysts are more likely to rate a stock a buy than a sell, B) if the vast majority of analysts that cover a particular stock rate it a sell, that acts as a big red flag that something is wrong with the company.

— Concern: tcost .. reading the fine print is time-consuming and perhaps poor ROTI. Therefore, when I look at ratings I mostly look at the percentage “breakdown”. Fine prints can contain crucial details, esp. in fiancial statements, but not in analyst reports! The analysts write to attact attention, so they would not bury important details in fine prints !

In absolute terms, I spend very few hours on analyst ratings or online recommendations. Longest article I would on a stock is 100 words.  However, within my 3-min due diligence framework, media-research is a big component indeed.

Note: Unlike MOETF, Index investing requires very little media research.

— A final, big question .. Q: Let’s say we rank the various inputs (to our decision making), and let’s say 30% is a reasonable level of influence by media (analysts++), then am I too receptive/attentive?

(But Why bother with this question? I think this question might come up during my discussions with other investors. Also, the degree of influence is a non-trivial factor esp. in eq investing. )

Buffett: “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.”

Independent research .. sounds cool, esp. to an idealistic investor. In reality, it is foolhardy to buy (or sell) against visible consensus among analysts.  When too many analysts say “Overpriced” then I’m very reluctant to buy. I guess this is prudent of me. Overpaying for a stock would hurt my DYOC for years. Therefore, harmony is needed.

It’s quite common to encounter one negative forecast for my “favorite of the month”. We can either A) ignore it, B) reduce our purchase, or C) cancel it. Which option is independent? (A). We have no time to do our independent research. So I never choose (A). Since the media does affect my decision-making, how do I manage its influence? I limit my research t$cost.
* tcost .. a big factor. See section above.
* $cost .. So far I don’t feel the need to pay for advice.

— which rating sites are convenient
https://www.tipranks.com/stocks/gain/forecast .. 96,000 financial experts, including Wall Street analysts, financial bloggers, hedge funds, and corporate insiders,

  • 🙂 has a “enter stock name” search box. Easily click into the box -> type “MSFT” and Enter.
  • 🙂 has a link to dividend data
  • 🙂 the sentiment dashboard (left menu -> StockAnalysis) … comparable to analyst rating.

https://money.cnn.com/quote/forecast/forecast.html?symb=gm ..

  • to change the trailing ticker string, you need to double-click exactly on the symbol string embedded in the URL, then type the new symbol, and Enter. Slightly harder than TipRanks.
  • 🙂 historical ratings .. nice presentation
  • 👎 small print, esp. on count of Buy/Sell

t_bbSitt ^t_bbSit4exit ^ t_unestablished companies

Posted on by tiger40490

k_babysit4exit

— bbSit4exit .. about the doctrine, the conventional wisdom

— A stock is labelled “babysitt needed (potentially)” if meeting all conditions:

  • (at risk of) excessive exposure, oversized .. generally close to $50 (or $100?) However, see speed up: riskCapital4U.S.eq 20k #Aaron
  • low div .. below 2%. Hard to buy-n-forget
  • often a hot stock, but lacking the long-term trend of MSFT

Classic examples — bccy; FXO; futures

— Many companies are labelled ‘unestablished’:

  • they usually pay no dividend if they are even profitable. They need all the cash to grow.
  • they often show unstable profits or no profits … a feature of the fast growth “adolescent phase”
  • they could show high market cap, up to 100B, but still unestablished.
  • they could show a “founded” date 10Y ago, but that’s unreliable. It could be in a very different business.
  • They are automatically baby-sitting stocks, unless risk capital < $20.
  • — eg:
  • Catcha
  • beyond meat
  • many tech stocks
  • some of the bio stocks
  • some of the EV stocks
  • twitter? no business model
  • moderna? proven profitability but no dividend and no long-term trend
  • — not unestablished
  • coinbase? biz model good
  • IBM, HPE, Oracle, GM, GE ..

 

[21]y I feel no urge 2sell #buy-n-forget

Posted on by tiger40490

k_babysit4exit

I do check my purchased stocks, perhaps too often, but luckily without the urge to sell.

I shared with a colleague and fellow investor (Gary) who once mentioned his/her day-trading tendency.

  • Somehow I am lucky to feel no temptation to sell my stocks, perhaps because 1) the number of shares is usually very low (recreational) .
  • In a declining market, I am lucky to be resistant (not “immune”) to panic, trying to get rid of “toxic” asset.
  • Another reason — 2) I spent 5-30 minutes analyzing each stock + pre-clearance, so I don’t want to waste my time by selling soon.
  • Then the dividend factor comes into play — I can hold long term because I believe in the dividend safety of my stock picks.

“Does it make sense to you?” I asked. My colleague nodded. I kinda trust his/her reaction because now I think the temptation is real and widespread. I recall my temptations in 3episodes@ non-recreational trading

Note selling would also require pre-clearance.

j4 alternative ETF to SPY

Posted on by tiger40490

Background: I already have many (invisible) positions closely tracking the SP500.

In speed up: riskCapital4U.S.eq 20k #Aaron I explained the need(?? or unwanted peer pressure) to speed up my risk capital build-up. If I have not decided to allocate to a sector, but want to increase my exposure to the broad U.S. market as a whole,  then there are a few alternatives to the SPY ETF.

  • 80% chance I may realize that an “alternative” is very similar to SPY, not a real alternative. The buying decision was therefore misguided. The financial impact is likely small, so the tcost incurred was really for learning.
  • 20% chance that I may find something worthwhile in these alternative ETFs
  • tiny risk that the returns on these ETFs are really inferior to SPY. I take it as a market risk and learning lesson.

##choosing a broker firm #Rbh,Poems

Posted on by tiger40490

— Singapore

https://www.drwealth.com/brokerage-account-singapore/ listed 5 Factors to Choosing the ‘Best’ Singapore Broker. Many of those factors are unimportant to me. Here are my criteria.

  1. criterion: commission
  2. criterion: customer support by phone/email
  3. criterion: usability features. Each user has her own picks. I prefer
    • market depth of orderbook
    • charting
  4. criterion: safety of client assets [cash balance and purchased shares]. CDP is supposed to be safer.

POEMS emerged as a clear favorite due to 1) comm 2) phone support

— US context

  1. commission
  2. safety .. K.Hu pointed out the Rbh weakness
  3. usability features .. Rbh is rather barebones and primitive, but good enough for me
  4. phone support

sReit, as compared to usReits++

Posted on by tiger40490

 

I feel sReit [S-Reits] is more transparent than usReit, largely due to the nanny state regulation. A club of heavy-hitters. The parent companies are often government-linked, otherwise huge rEstate operators heavily scrutinized by regulators and media. As such, they are low-risk in terms of governance, credit risk,,,

Many sReit gets more media coverage than the typical US-reits, partly because of their brand names. The buildings they own are often household names.

There are relatively few variations (a form of cognitive complexity) among the sReits. Very similar business models.

I feel Sreit business models are hopefully less complicated than US-reits. Only half of my US-reits are traditional lease operators. The financial devices used in Sreits are presumably more vanilla, more transparent.

— compare to div stocks like T:US

  • both Blue-chips with long trec
  • need to see div trec
  • 🙁 no zero-commission incremental buy

[22] j4 buy@every correction/crash

Posted on by tiger40490

Warning: [[irrational exuberance]] gave lots of data against this /tactic/ — Invest at every correction or crash, invest in bigger amounts than you have recently done in normal times. If decline continues, then decide whether to buy-n-Forget or invest more.

ETF quickGrab: buy-low +! due diligence is a more concrete plan.

— J4: ECR compound return .. widely accepted, even on non-U.S. markets [1].
This perception basically assumes that after every decline, perhaps after a few years [1] of zigzag, market would eventually transition to a “fast_window”, where annual return stays above average for months or years.

Some traders focus on the shorter horizon and target to capture a few months of fast_window. In contrasts, authors (big influence on me), financial advisors, financial planners, bank staff … focus on a longer horizon of a few years to a decade. But regardless of horizon, all of them agree on one thing — the fast_window.

— J4: DCA robot.. See my blogpost on DCA
j4: DRIP robot is related

DCA and DRIP assume that even after a market /rally/, it’s not unwise, not risky, to let the robot continue investing _small_ amounts.

— [1] Warning: this analysis only applies to U.S. equities. Non-U.S. markets can experience a long trough before (hopefully) entering a fast_window.