Author Topic: When to tap out?  (Read 8170 times)

WillPen

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When to tap out?
« on: November 07, 2014, 01:01:54 PM »
In March of 2013 I picked up some shares of a 3D printer company. I did it before I was financially aware and it was really just a speculative move on my part. The stock went up (way up) and then down (way down) to the point where I'm actually carrying a slight loss as of today. My intention was to hold this stock as a long term investment, but the more I learn the less I want to do with it. It's pretty volatile, and on top of that, the company seems to kind of be stumbling a bit as it figures out how to manage recent acquisitions and product demand.

I'm not sure it's an investment I would make now. I hate the idea of selling with no gain (or even a loss), but I feel like there are far better places to put my money to work instead of waiting on market sentiment for the industry to change.

Has anyone had to grapple with a decision like this? What helped you decide to stick it out or move on?

Thanks --

Will



solon

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Re: When to tap out?
« Reply #1 on: November 07, 2014, 01:31:39 PM »
Just sell it and be grateful for the cheap education!

In the future, have a plan before you go in. "I will sell when <some metric> reaches <some value>" or something like that. I'm magicformula investor, and that plan specifies time periods for holding.

Numbers Man

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Re: When to tap out?
« Reply #2 on: November 07, 2014, 01:40:53 PM »
Just sell it and be grateful for the cheap education!

In the future, have a plan before you go in. "I will sell when <some metric> reaches <some value>" or something like that. I'm magicformula investor, and that plan specifies time periods for holding.

^ Great Advice! Boom! Thread over.

Eric

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Re: When to tap out?
« Reply #3 on: November 07, 2014, 02:11:22 PM »
Might be time for some Tax Loss Harvesting

http://www.madfientist.com/tax-loss-harvesting/

GGNoob

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Re: When to tap out?
« Reply #4 on: November 07, 2014, 02:55:02 PM »
Might be time for some Tax Loss Harvesting

http://www.madfientist.com/tax-loss-harvesting/

Yes, harvest those loses and move on to index funds.

skunkfunk

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Re: When to tap out?
« Reply #5 on: November 07, 2014, 03:26:32 PM »
Is this a significant portion (>1%) of your money? If so, get out of there and do something that makes more sense.

If it's insignificant, then it doesn't really move the needle and you can do as you will as there's no major risk involved.

Rpesek6904

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Re: When to tap out?
« Reply #6 on: November 08, 2014, 03:07:21 PM »
How long have you done the magic formula investing? How is it.going? I have stuck with indexing but I am curious because I read that book.

BEN_BANNED

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Re: When to tap out?
« Reply #7 on: November 08, 2014, 04:53:26 PM »
How long have you done the magic formula investing? How is it.going? I have stuck with indexing but I am curious because I read that book.

I checked out the magic formula investing site out.

I wonder if a possible profitable/mustachian alternative would be to take the 30 recommended stocks and create a Motif out of them? It would save a fortune on brokerage fees.

RyeWhiskey

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Re: When to tap out?
« Reply #8 on: November 08, 2014, 10:32:15 PM »

How long have you done the magic formula investing? How is it.going? I have stuck with indexing but I am curious because I read that book.

I checked out the magic formula investing site out.

I wonder if a possible profitable/mustachian alternative would be to take the 30 recommended stocks and create a Motif out of them? It would save a fortune on brokerage fees.

I don't think so. Motif charges $4.95 (I think) to add an individual stock to a motif. So that's $150 right there. Better bet would be to see how many Loyal3 stocks fall within the formula and buy those at no commission.

BEN_BANNED

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Re: When to tap out?
« Reply #9 on: November 08, 2014, 11:36:55 PM »

How long have you done the magic formula investing? How is it.going? I have stuck with indexing but I am curious because I read that book.

I checked out the magic formula investing site out.

I wonder if a possible profitable/mustachian alternative would be to take the 30 recommended stocks and create a Motif out of them? It would save a fortune on brokerage fees.

I don't think so. Motif charges $4.95 (I think) to add an individual stock to a motif. So that's $150 right there. Better bet would be to see how many Loyal3 stocks fall within the formula and buy those at no commission.

According to the Magic Investing website, they advise buying 30-50 stocks and holding them for a year and then selling. Motif charges a total of $9.95 for a bundle of stocks up to 30 if you create your own Motif.

Of course, you'll end up with some fractional shares depending on your allocation and how much money you initially put in.



hodedofome

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Re: When to tap out?
« Reply #10 on: November 09, 2014, 05:49:43 AM »
During the financial crisis I bought a decent amount of FEED, a Chinese ag stock. I thought I was a genius as China was gonna take over the world, they got a ton of people to feed, etc etc. it quickly doubled from my buy point and I thought I was so smart.

Then it went down, and down, and down. I finally sold at a 50% loss and learned a good lesson.

Terrestrial

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Re: When to tap out?
« Reply #11 on: November 10, 2014, 08:37:04 AM »
When faced with similar investing decisions I always look at it like this:

It matters little where the stock has been (or even what I paid for it), it matters where you expect it's going to go.  If you wouldn't make the same investment now then it's probably not a good investment to keep holding either, sell it and move on to something else that you feel has a brighter future.  Something is only worth holding if you expect it to perform as well or better than your next best option, if it's not the case then it matters little what you paid, you are better off rolling it over to something you expect to perform better.


Scandium

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Re: When to tap out?
« Reply #12 on: November 10, 2014, 10:52:08 AM »

How long have you done the magic formula investing? How is it.going? I have stuck with indexing but I am curious because I read that book.

I checked out the magic formula investing site out.

I wonder if a possible profitable/mustachian alternative would be to take the 30 recommended stocks and create a Motif out of them? It would save a fortune on brokerage fees.

I don't think so. Motif charges $4.95 (I think) to add an individual stock to a motif. So that's $150 right there. Better bet would be to see how many Loyal3 stocks fall within the formula and buy those at no commission.

According to the Magic Investing website, they advise buying 30-50 stocks and holding them for a year and then selling. Motif charges a total of $9.95 for a bundle of stocks up to 30 if you create your own Motif.

Of course, you'll end up with some fractional shares depending on your allocation and how much money you initially put in.

wow, I can't believe anyone actually fall for that. A "magic" formula that tell you to buy low P/E stocks and sell them a year later? Every year. That will not end well, except perhaps for your broker.

hodedofome

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Re: When to tap out?
« Reply #13 on: November 10, 2014, 03:07:57 PM »
wow, I can't believe anyone actually fall for that. A "magic" formula that tell you to buy low P/E stocks and sell them a year later? Every year. That will not end well, except perhaps for your broker.

It's had a pretty good run out of sample since the book was first published. And it's not low P/E stocks. Perhaps read up a bit before criticizing something?

hodedofome

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Re: When to tap out?
« Reply #14 on: November 10, 2014, 03:20:50 PM »
I don't think so. Motif charges $4.95 (I think) to add an individual stock to a motif. So that's $150 right there. Better bet would be to see how many Loyal3 stocks fall within the formula and buy those at no commission.

According to the Magic Investing website, they advise buying 30-50 stocks and holding them for a year and then selling. Motif charges a total of $9.95 for a bundle of stocks up to 30 if you create your own Motif.

Of course, you'll end up with some fractional shares depending on your allocation and how much money you initially put in.

Yeah it may cost $9.95 up front when you start, but at the end of the year when you tax-harvest you'll be selling some stocks early and the rest of the stocks late. So you'll be paying a lot of the $4.95 fees after that.

However, brokerage fees are all a function of how much money you have. Even if you have $100k and you have to buy + sell 30 stocks a year (for a total of 60) then that's $300 a year in fees you are paying. That's 0.03% which is less than the Vanguard Total Stock Market ETF management fees. Assuming the Magic Formula continues to match or outperform, then it's cheaper than index investing. If you had $1 million+, it would be a steal.

For smaller accounts, Interactive  Brokers charges $.005 a share. I think they generally require at least $25k in the account however. Up to a certain account size IB is a steal. After that, you're better off paying a flat rate like most other brokers do.

Though it's not discussed much in these forums, your broker's trade execution can make a big difference. IB does a pretty good job in this regard. When I was with TDAmeritrade, it was much worse.
« Last Edit: November 10, 2014, 03:27:34 PM by hodedofome »

AssetGrinder

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Re: When to tap out?
« Reply #15 on: November 10, 2014, 04:29:47 PM »
I would dump it and re balance your portfolio. 3d printing stocks went thru its boom period and now their earnings are not keeping up. Could be years till they boom again.

WillPen

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Re: When to tap out?
« Reply #16 on: November 10, 2014, 05:39:20 PM »
I agree -- Thanks, everyone. I'm going to probably sell at some point this week and move on. The losses, while not ideal, will go to offset some gains from earlier in the year. The money will probably end up putting in more work in an index fund than waiting on the market's sentiment towards 3d printing to change.

I'm interested in wealth building so I won't be springing for stock in an individual company right now.


hodedofome

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Re: When to tap out?
« Reply #17 on: November 10, 2014, 07:43:19 PM »
There is a cycle to hyper growth stocks. When they start to get popular, their momentum can take them to heights that nobody could dream of, with PE ratios that defy reality. Then reality sets in at some point, and the crash typically takes it back to the prices where it originally took off. It may hang out there for a few years and turn into a value stock. But most likely the big move never happens again, and after the value guys have had their fill it turns into a normal stock.

That is, if they stay in business...

Scandium

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Re: When to tap out?
« Reply #18 on: November 11, 2014, 08:58:27 AM »
wow, I can't believe anyone actually fall for that. A "magic" formula that tell you to buy low P/E stocks and sell them a year later? Every year. That will not end well, except perhaps for your broker.

It's had a pretty good run out of sample since the book was first published. And it's not low P/E stocks. Perhaps read up a bit before criticizing something?
A trade-heavy market timing formula that supposedly beat the market (something the best paid people in the country are unable to do), which you can follow by buying a $14.73 book? No I don't think I need to know more to decide this is bunk.

RyeWhiskey

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Re: When to tap out?
« Reply #19 on: November 11, 2014, 10:06:09 AM »
I agree -- Thanks, everyone. I'm going to probably sell at some point this week and move on. The losses, while not ideal, will go to offset some gains from earlier in the year. The money will probably end up putting in more work in an index fund than waiting on the market's sentiment towards 3d printing to change.

I'm interested in wealth building so I won't be springing for stock in an individual company right now.

Just a final note: wealth building has less to do with what the asset is (in specific, obviously this matters in general) and more to do with what it costs to hold that asset and how long you hold it. What I mean by this is that you can have 30-50 stocks (as Benjamin Graham recommended) or 5,000+ stocks (such as the Vanguard Total World Stock Index Fund) but, in the long, long run it matters more that these investments cost as little as possible, that one makes periodic investments in these assets, reinvests the dividends, and doesn't panic and sell. If you're in it "for the long run" then you're in it to "build wealth."

So the idea of buying 30+ stocks per year and selling them, then buying more, etc... is not a wealth building strategy as, and even Warren Buffet will agree, one buys and holds to create wealth.

econberkeley

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Re: When to tap out?
« Reply #20 on: November 26, 2014, 03:56:45 PM »
Open a merrill edge account with 100k liquid assets and get 100 free trades per month. No need to talk about trading fees.