Investment general discussion thread

In My Humble Opinion
1

There have been some threads lately concerned about what people should do with their investments in light of recent… instability as well as some politics prediction threads revolving around performance of the economy in which people start discussing investment strategy. So I thought it might be a good idea to start a thread for any sort of investment discussion. Advice, strategy, predictions, news, questions, even bragging about your success or complaining about your losses, why not.

So I’ll start. I’ve had a good few years over the last few years. For most of my time investing I was a pretty safe buy some indexes and forget about it type investor, but I’d use 10-15% of my investment funds to make some sort of specific stock or sector ETF I liked. Over the years I did a really good job with that 10-15% personal discretion fund and I decided what the hell, I’m going to more actively manage my money. I’m up about 70% in the last 3 years. My best move was realizing that the world went insane when Netflix had one quarter with a subscriber drop (for good reason - covid ending, Russia banned) and everyone lost their minds and it crashed from $700 to $190. I bought a bunch at $212 and then some more at $380 and I ended up selling it at $1038. Unfortunately, at first that was just my 15% discretionary fund. It’s part of what convinced me to be more active. I wish I’d have followed my gut and threw 40 or 50 percent in there.

So anyway, I pulled out of the US market entirely 2 weeks ago due to the insanity of it and what seems to be a deliberate market crash. I’m not sure when/if I’ll feel safe putting my money in again. After a crash, I’ll have the funds to buy it at the bottom, but unlike in the past, I’m not so sure we’ll actually recover this time like we always have. I got out just at the right time – all of my stocks were within 3% of their high point when I sold them and most crashed right after.

I invested a bunch of money in European defense stocks. It’s kind of an obvious pick, and they’ve already had a lot of growth because of that. But it’s not just Ukraine they have to gear up for – they have to gear up for a world where the US won’t protect them, leaving them to neglect their own defense. Their defense industry is going to be growing for years. And while the insanity in the US market is going to make the entire world unstable, European defense seems pretty low risk to me. I’m already up about 13% on those – I’ve had EUAD for 2 weeks but I just added on by buying some Rolls Royce, Indra Systems, and Thales. Rolls Royce is a decent chunk of EUAD they’re probably my most owned stock at this point. I like them – they have a very good jet engine and marine engine business outside of their military contracts. If anyone has any suggestions for smaller EU defense stocks, I’m all ears.

I bought some gold for the first time in my life. Well, a gold ETF. But now I’m wondering if I should buy actual physical gold for when the Mad Max times come. About 14% of my portfolio. It’s a hedge against a massive decline in the US dollar.

I’ve also been shorting both the whole market and particularly Tesla the last few days. I only shorted the S&P for half a day – I expected yesterday to be a big crash and it was early on but kind of recovered later. I sold it for a modest profit. But I’ve been sticking with TSLZ, a 2x leveraged inverse Tesla etf. I know Tesla is already down a bunch but it’s gotta be the most irrational stock in the world and I feel like at some point people are going to see the emperor’s new clothes aren’t real and it’s going to crash hard. Sales are down like 60-75% in Europe year over year. BYD beats them in China. And Elon is doing everything he can to be hated in the US.

I actually made my first put on Tesla. I don’t really know what I’m doing with options trading but I’m trying to learn. I need it to hit $245 in the next 3 weeks to be able to exercise it. I’m thinking about just shorting it in general – it seems simpler although riskier.

So anyway, what are you doing in this market?

2

Seeing what’s coming, I should have converted my (somewhat aggressive) stocks to cash and bonds Friday. But I hesitated because of a slight bump and waited until Monday. The hesitation cost me $1,200. [NB: I don’t have a lot of money in my 401(k); less than 200 kilobacks. :frowning: ] Anyway, I chose the ‘safest’ option available at John Hancock, who holds my 401(k).

I don’t know anything about investing. I just noticed that the fund has about 63% in cash, and about 37% in U.S. bonds. There’s a list of ‘top holdings’. I’m not sure what those are. I assume they are what make up the bonds.

3

Money markets are super safe, and basically are investing the money in the safest of bonds and passing the interest (well, most of it) back to you. The yield will move with rates. If you’re looking for safety, you’ve found it.

MM are basically a savings account.

4

Cash is usually safe(-ish). It isn’t if the government starts printing money and sending it out in envelopes (or other equivalents). Nor is it under inflationary pressures. Prices are growing. Your cash value is not. In terms of your purchasing power, it’s shrinking, not growing. Ideally, as an investor, you should always at least able to keep the value of your holdings at parity with inflation and ideally outperform it.

Historically, inflation grows slowly enough that moving money to cash for a short while - a few months, maybe a year - doesn’t offer any major loss in purchasing power. However, to bring US wages down to comparison with Chinese workers and equalize the trade deficit, you would need to devalue the dollar by about a factor of 10. (With tariffs, that might not be necessary and you might be able to target a factor of 5 or something, in order to get Americans to buy American. But to make the US competitive on the global stage, you would ideally turn $100 USD into today’s equivalent of $10.) If you’ve saved $50k, you’ll have the purchasing power of $5k when devaluation is done - if you’ve stored your money as cash.

Bonds are generally equivalent to cash.

5

:call_me_hand:

6

The best web site I know of is:

Some may object to that site because forum moderators strictly forbid political discussion, as seen here.

At first glance, it may seem that this normalizes Trump… My impression is more that the powers-that-be there do think MAGA governance lowers the utility of investing. The problem is finding a way to escape from this. They would say – baring sheer luck, you cannot. Trump is just as liable to hurt bonds as stocks.

Best book (written by a Krugman colleague and longtime Princeton University endowment advisor)::

Putting that a bit aside, one could consider something like this:

International Stock and Bond Index Funds

A problem with avoiding U.S. markets that big firms worldwide are multi-national. So when you buy a fund with American securities, you are getting a lot of international exposure, and when you buy non-U.S. securities, you are getting a lot of American exposure. Broad worldwide index funds therefore always have tracked close to broad U.S. index funds. But I do not see much downside in having more international stock exposure.

Another question to ask is whether to try to get your investments denominated in non-U.S. currencies, like the Euro or Canadian dollar. I think there’s a good argument why this won’t work, but I cannot recall what it is.

7

I’ve been trying to figure this out as well and I’m not satisfied that I know the answer.

As a general principle, when you buy stock, you’re buying a percentage of ownership of a company. Your USD go away and are replaced with “ownership”.

The value of ownership is - in theory - the sell price for that company. If some big company thought decided to buy it, they’d have to pay X to get it, and would only be willing to pay X if the total revenues/profits/etc. would make it worth it the purchase, within a few years time.

Those revenues and profits could be coming from anywhere. But if it’s a European company that largely sells to European customers, then the stability and growth of the European market is going to have the largest impact on how valuable the company is. And, even should there be shrinkage in the US-portion of the business, your ownership in the European company is going to be shrinking less than if you had placed your ownership in something more tightly tied to the USA. You pull ahead, relative to Americans who stayed in cash or invested in USA.

One concern that I had was that, perhaps, a foreign company can list only their US business on the US stock market, and that’s separate from the rest of their business. From what Google has told me, that’s not generally how it works.

A second concern that I had was that, by buying an American ETF that contains foreign businesses, that I’m really just buying something equivalent to an American LLC that invests in foreign exchanges and somehow that is still tying me to the performance of the US in general. But, I can’t really see how that might be given that, on their side, they’d simply be swapping the cash I give them for ownership in the foreign business.

The value of ownership should tie to the real world value of the company, covering all the markets that it serves. How you bought that shouldn’t matter except in terms of how much loss there is due to paying middle-men.

But I’m really not confident in that. Maybe there is some argument that it’s better to purchase stuff on a foreign exchange, rather than buying a US proxy?

8

Thanks for this thread.

I’ve been managing my own investments for the last 25 years, since my husband died, and I think I’ve done really well. I don’t do anything complicated, and I’ve made some good choices over the years. But I don’t know exactly what to do now… Naive questions may follow.

When you say “pull out entirely,” do you mean sell all the U.S. stocks you own for whatever the market price is on a given day? Or “pull out” gradually over a period of days, weeks?

Similar question. You would sell stocks and buy bonds at (virtually) the same time and leave some funds in cash?

I think I need to up my game…

9

As I said upthread, I don’t know anything about investing. When I log into John Hancock, I can choose to ‘manually rebalance’ my investments. Any changes made must sum to 100%. So I went to the Money Market Fund (link in my previous post) that is about 63% cash and about 37% bonds and entered 99%, and went to the T Rowe Price option I have and entered 1%. So ‘dumping stocks’ and ‘buying bonds and cash’ happened at the same time. My 401(k) contributions are still going to the T Row Price fund. I’ll be losing money as the Market crashes, but I’ll be buying them cheap when it bottoms.

When I talked to our company’s financial advisor last week, he said perhaps the safest option would be to convert my 401(k) into a bank-held IRA. That would give me FDIC protection, but at a lower interest rate. IIRC he said the Money Market Fund (or bonds, or something) were earning 4.4% interest, while an IRA would only earn about 2.2%.

I checked my 401(k). (I wish I could check it right after the Market closes, but I have to wait until the next day.) My portfolio is up about $149 from the 4th, after having automatically contributed about $106 (toward the T Rowe Price fund).

10

Sounds like you know rather a lot. :face_with_monocle:

I’ll have to spend more time looking in depth at the Charles Schwab site to see if there are options like you mentioned. Things have been growing, so I’ve mostly left them alone.

11

I have all my retirement funds invested in equity index funds in the US markets (Vanguard Invsts). I have at least a 16 year window before taking distributions. I’ve been consistently investing at least 10-15 percent of my income since ‘92 so it’s a little over 500k by now.

In short, I decided to transfer some funds to a Vanguard international fund that holds large caps in mostly UK, south and east Asia and Brazil. I’m pretty good at reading financial information so did a lot of research from many different sources over the years before buying into it.

It hardly goes without saying: I want to thank our OP for sewing this thread because I’ve always been interested in financial information. An excellent selection and breadth of topic indeed.

12

For anyone that is not familiar with “Norbert’s Gambit”, it is worth looking it up for efficient currency exchange.
The short explanation; establish an investment account combination in each currency (i.e USD/CDN). Buy a cross-market equity in one currency, move/transfer the equity shares to the alternate account and selling it in the opposite currency. DLR/DLR.U is an example but others that are listed on 2 exchanges will work the same way, such as TD Bank (TSX and NYSE).
ETA-This was not meant as a “reply”, sorry.

13

I really don’t. For example:

I’d have to google ‘equity index funds’ to see if that’s what I’ve been investing in.

Basically, I’m like this: 401(k)s are good. I’ll have part of my pay go into one. I want as much money as I can get. I’ll go for an aggressive fund. Rough times? ‘Adjustment’? It will smooth out. Let it ride. And that’s worked so far. But I could see what was coming in 2007, and I can see what’s coming now. So I’m betting stocks will crash, and I’m putting what I have into the safest option I can find.

14

Investing in an international index fund in addition to a domestic US one is a good idea. I think the usual three-fund portfolio includes domestic equities, international equities and bonds.

15

No, I just sold everything all at once. It seemed obvious to me that we were heading to a crash, and while I may have jumped the gun by a few days (I didn’t, but that would’ve been the downside to doing it all at once), I sold almost everything I had at a high. I know a lot of people use dollar cost averaging to reduce their variability and pulling out slowly would kind of be the flipside of that, but if you’re confident of your assessment I don’t think there’s any reason to make the move slowly. Incidentally I think dollar cost averaging is the wrong move too. If time in the market is better than timing the market, then reducing the rate at which you invest is just going to cost you in the long run. It feels a bit gimmicky to me, most of the people I read talking about DCA seem to think it’s some sort of clever trick they came up with.

It ended up working out not because I dumped the US stocks before they crashed but because EUAD, where I put about half the money I took out, is up 21% in the same time period. I’ve actually had my best 2 weeks of investing ever, I’m up about 10% in total in that time period.

16

Incidentally, if you’re willing to do a risky play (not that risky, I think), shorting Tesla has been a lot of fun. It lost another $16 today. I get to make money while Elon loses it, which makes the money that much sweeter. The easy/safe route would be to invest in TSLZ, which is just a 2x inverse Tesla ETF, meaning that if Tesla goes down 3% one day you’ll gain 6% on that. Of course on the flip side it’s the same for losing. You don’t generally want to hold inverse funds long term, both because most stocks do well over the long term and because of the unique nature of inversing a stock – if something loses half its value one day, you need it to gain 100% the next day to come to the original price, which causes a general downward trend.

Next less risky move is buying a put. I bought a $245 put on Tesla for march 21 I’m hoping will pay off.

Next up is just short selling it. I did that but only with 10 shares because I’d never shorted before and I kind of wanted to make sure I understood how it worked and didn’t want to invest a lot until I did. Plus I already had a lot of money on Tesla going down through the inverse and put anyway. But I’m kind of wishing I just did a short all along, it’s simple and works great. The downside of a put, of course, is if Tesla suddenly shoots up, you can be down A LOT.

Tesla has already fallen from a high fo like $430 to $260 or so, so you may think it’s already near the bottom. In that case, obviously, don’t short it. But I think it has already been a massively insanely valued stock all along and people are finally coming back to Earth, so I think it’ll probably hit $200 in the next few months. In fact, if I’m confident of that, I could get a really good price on a put. Maybe I will.

17

Okay, so a longer term put on Tesla down to $200 is way more expensive than I thought. A 3 month $200 strike price contract is $10.40 (per share) when I was expecting like $3. Which means a lot of people are expecting Tesla to fall pretty far, otherwise the contracts would be cheaper. Since I’m not getting a great price on that put I think I’ll just buy another batch of shares for regular short selling.

18

I have mentioned elsewhere that over the course of the last couple of months, I have learned a boatload about bonds, and I have also converted about 40% of my portfolio from index funds to individual corporate bonds. Bonds generally offer a higher rate of return than money markets and CDs, and they are a relatively safe investment. My Fidelity account makes it quite simple to purchase bonds.

I am at a point where I need to protect my wealth, while still achieving modest growth. I believe that bonds are the best vehicle for this strategy. My bond purchases will average between 5-6% growth over the next 6-7 years, which is exactly what I need.

If anybody wants to learn about bonds. I recommend the following (free) book. It’s not exactly riveting reading, but it does answer a lot of questions regarding bonds and the bond market.

The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More

19

Jobs report comes out tomorrow and I think people are recognizing that we’re headed towards economic disaster so I plan on making a big short play tomorrow. I’m not sure on what specifically though. The whole market? S&P 500? What sectors are going to be hit worse than others? I’m thinking tech simply because it has the highest (arguably over-)values and highest P/E ratios may create the biggest fall but I have no idea on that one. Maybe a manufacturing index because the uncertainty is going to hit them particularly hard?

I guess weight it towards growth since people tend to flee from growth to value when shit is hitting the fan.

20

Yeah, I put some money in TSDD which is an inverse fund shorting Tesla. It has been doing well for me since the moment I invested in it. I didn’t put in a huge $ amount but it does give me a bright spot each day when I see how much it grows as Elroy’s stock drops.