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Curse you, Dow-Jones, CURSE YOU!!!

Well, no, not really.

I've been playing Petty Investments with my savings. Mostly I'm treating this like a video game, just playing around.

What I've learned: It's fun to buy small amounts of stocks to keep the risk low, but hard to make any percentage of $ back on that, because while gains and losses are relative to the amount of money you've invested, broker fees are flat. Therefore, a saner strategy would be to invest in chunks no smaller than, say, $300, if I plan to sell once I've made an amount of money.

Sharebuilder's site is extremely buggy and hostile, unless I'm doing real-time buys and sells.

Thusfar, I've made about $75 on an average of $1000 over about six months. This is roughly a 14% gain over a year, I'm guessing, which is pretty darn good, though because the numbers are really pretty small, it doesn't seem like much.

Right this second, everything seems to have taken a plunge, though. This is irritating, but it happens.

Comments

( 5 comments — Leave a comment )
spottedhyena
Feb. 27th, 2007 06:45 pm (UTC)
One thing to be careful about is not to sell the stock on the same day you buy it. This is because there is a certain lag time between a trade is executed and all the paperwork goes through to reflect the transaction. Since this lag time can be variable, if you execute both a purchase and a sell order on the same stock on the same day, it's possible for the sell transaction to clear before the purchase transaction--resulting in an illegal short sale.
spottylogic
Feb. 27th, 2007 07:26 pm (UTC)
Worth noting, though I tend to wait a while before selling, at least right now. It's possible I'll get into day-trading, but not this weke, certainly!
edthehyena
Feb. 28th, 2007 05:47 pm (UTC)
Arf! True true! Also, day trading is a sort of fad where some people get filthy rich and a lot of people end up pretty fucked, and even seemingly breaking even sucks. Why?

First and foremost transaction costs, moving that shit around is expensive! Mostly this is why day trading requires you to "win" at the stock market more often than your usual investor

Secondly the tax implications certainly exist when you're banking income and expenses like that. Sometimes stocks act as a tax shelter because until you realize the capital gain or loss, you're really not taxed at all.

Both income and dividends are taxed like an employer paying you. Capital gains, once cashed (realilzed), actually tend to be taxed at a lower rate. Cause we like our wealthy here :)

There's a much more compelling reason not to day trade. Every stock has a Beta (an indicator of market risk), and every stock has a co-varaince in relation to every other stock.

a + co-variance means it tends moves with the stock
a - co-variance means it tends to move against the stock

if you can equally allign two high risk stocks properly, the effect on a portfolio is that your return is the average of the two stocks WITH a lower risk of return than either stock provides.

This is concept is referred to as the efficent frontier of portfolio management and it sometimes takes a lot of active trading (and research!) to balance and rebalance all the co-variances and Betas to truely optimize your risk and return ratio.

Lazy people just buy mutual funds. Those don't always seek to maximize risk and return. Often they simply seem to mimic the market (index funds) or buy every company in a specific sector/infrastrture aspect of a country.
spottylogic
Feb. 28th, 2007 06:47 pm (UTC)
I like carrion!
edthehyena
Feb. 28th, 2007 07:36 pm (UTC)

Oh me too! Carrion tacos are in vogue here :)
( 5 comments — Leave a comment )

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