trading story - back in the 90's I thought I invented money.....the market was screaming towards 10,000 (for the first time) . I had the opportunity to spend a little  time with one of   NationsBank's ( now BAC ) best and biggest traders . This guy managed billions of other people's money . So, after a couple beers I had to ask him a question . I had to "pick his brain" .
 (At this time, I'm in my mid-30's , I'm "riding the bull baby" . I'm going to "retire in 10 dawg")
I ask , so what are you getting into ? got any hot picks ? The guy looks me right in the eye and says....."IBM ,McDonalds,  Exxon , Wal-mart it isn't rocket science, invest in   big companies that are run well . there going to get you 10% a year , you'll beat the street, you beat CD's , any savings account and you'll probably beat your broker. picking stocks is the easy part , knowing when to sell is what separtates the boys from the men , or should I say it's what separates the boys from their money. "  Well I , I didn't listen....I jumped on JDSU, World Com , etc.. ......rode them to the bottom. as the internet bubble burst.  Got nervous , sold everything  and as it all picked back up I had neither the capital or the will to play the game .Needless to say I learned a hard lesson. This boy" old boy"  had been separated from his money .  (The old boring broker has since retired to St. Barts .)  

  Portfolio management 2009 - 
1) Buy 3 or 4 well run big companies .  Low P/E , Low debt , good margins ( relative to their industry) , with a track record of paying Div's . make those companies your anchors .  ( I'm in BAC , MCD, MSFT and CVX , I'm going to buy some WMT in august )  
2)Buy more of these anchors on 6-10% dips , keep up with the news relative to your anchors .
3) hold .  know your when your sun is setting . Some people are day traders , some are DECADE traders . As hard as it is to fathom, there are millions of people that don't give a hoot that the market went up , down, or sideways today . Whatever CNBC or Cramer says today......they'll say something different next week . remember , slow , steady see-saw markets don't make news . it ain't "sexy"
4) have a  sell strategy - When mine gain 25% , I  sell 25% . When they gain 100% , I sell  half . Create your own stratagy , but surely have one , BEFORE you buy .  
5)  Good companies sometimes crash so know what you are investing in . If you can't explain to someone how a company makes money or you can't understand how they make a profit , DON'T give them your money to play with .
6) read , read , read , read .....I'm still teaching myself to read a balance sheet . You have to be honest enough to know what you don't know.  I know thing about "shorting' or options .  so I stay out of those conversations . I watch , I learn  , I read .
7) relax.....it's only money....if you were doing this for a living you wouldn't be posting on a discount broker's blog space . 
8) ( in tribute to the movie "The Graduate) ......  " I want to say one word to you. Just one word. .......PLASTICS  !

Note ro #7 : If you are doing this for a living.....get to work !  the Asian markets are open and London and Frankfurt open in 3 hours . The Mylanta is in the 2nd drawer on the right . The Scotch is right next to it :)

 

  spshapiro - I have to be honest , I retreated to CD's and Mutual fund for several years before jumping back in . I don't know if I am a survivor but I have lived to play another day .
 
The one thing I have survived is this question in the summer of 2001 . ( spoken with a wife's steely gaze  ) ....You lost how much ? 
I laugh now but needless to say I learned alot . My risk tolerance is directly tied to my comfort level while sleeping on the couch :)


Good Luck trading today  !

DK

Veneratio said: Please do not take this the wrong way but I would like this discussion to be for serious and seasoned investors only. It will benefit everyone involved if the discussion remains in the realms of more seasoned investors as discussion will not get sidetracked into "What's your favorite penny stock?" "What stock will double tomorrow?" ect, ect. If you are unsure why you're portfolio is the way it is then please sit this one out and read and learn. It will be far more beneficial.

On to the question of the day... How are you managing your portfolio and why?

I'll start by saying that I put the majority of my assets in stocks about 3 weeks before this rally began, and I have stuck with it. Just recently I decided the risk was starting to outweigh the reward, and I felt it was time to hedge my portfolio. First, I shifted roughly 30% of my portfolio to cash. Second, I had to decide what to do with the remainder of my portfolio. I narrowed it down to three choices:

1. Don't touch a thing and simply maintain my small-cap long positions.
2.  Stick with #1 but also hedge my risk by shorting companies I felt were over-valued(to do this I would have to draw from my cash)
3. Sell off all my long positions, allocate 50% of my portfolio to cash and go short with the other 50%.

Ultimately, I have decided to go with #2. I am feeling bearish, and I feel the reward of a continuing rally is greatly outweighed by the risk of a significant correction. I have however been wrong so in an effort to benefit from either a continuing rally or a correction I have chose #2. My thought process is as follows:

My current stocks are all issues I believe will not suffer dramatically from a significant correction in the U.S. market. If the U.S.  market does start to downtrend I believe the gains in my short positions will outweight the losses in my long positions. If the market continues to go up I believe the gains from my long positions will outweight the losses from my short positions. In summary, I hope to achieve a win-win situation for myself by going long stocks that will outperform in both a bear and bull market which along with my short positions will enable me to profit from either.

As for what I am shorting? Nothing right now actually. I've been working on my revised portfolio this past week, and I plan on initiating my positions before the weeks end(barring any significant change in heart for some reason).

How about you? Are you bearish, bullish, or sitting on the sidelines and how are you structuring your portfolio accordingly?

 
So far so good guys. My small cap long positions are all outperforming the market even in a significant down day(majority around break even or positive) and my short positions are performing extremely well.

   If I may make a suggestion, El D, you might want to try to get on the other side of the options trade with a portion of your money. Sell them. That way time decay is on your side. Here's what I suggest to try just once:

   Pick a stock you wouldn't mind buying right now. Look at the put option that's just out of the money for the next month's expiration. Make sure you will get a 3-5% return on the premium. If it doesn't return this much, find another stock. Allot enough cash to cover the buy and do not touch it! Now sell a few of those puts and collect your premium up front. If the underlying jumps quickly (in a few days) such that the put drops half (or so) of what you sold it for, buy it back and collect 1-3 % in a few days. If not, then after a week put in a GTC order to buy it back for a nickle. On the last day of life, remove that order and take your chances.

   If it drops and you are assigned, well, you bought a stock you wouldn't mind having bought at a higher price + the premium you collected. If the option expires, you pocket the premium + the interest of the money market you selected.

   This requires level 4 options trading if you have it. I do recommend getting that level. A very high percentage of my put sales are bought back on the cheap.

  Another choice is selling calls on stocks you already have at a strike price you wouldn't mind selling the stock at. Your target premium should be 2-5%. If you think the underlying might tank, you might want to buy a put for protection (collar), I usually don't. Use the same discipline in reverse as I mentioned above for buying the calls back. If  you bought a collar and the underlying does start to tank, you can buy the call, sell the underlying (as per your normal sell rules), and ride the put. ALWAYS buy that call back first! You can get really burned if you don't.

   Both of these strategies generally work pretty well for me. I've been burned pretty badly doing the simple buying of calls too. I've just sat there and watch a pretty penny evaporate. The above strategies give you a cushion, but they are not a guarantee. They just improve the odds. They also enforce both buy and sell rules that you set ahead of time for stocks.

~~Weird Uncle Jesse~~

   My trades are visible, take a look. I've made mistakes, sure, but you can both learn from them and see the technique I described in action.

~~Weird Uncle Jesse~~