In a post the other day, Yogi asked what methods of diversification that I use. The bulk of my posts on this blog regarding the stock market will revolve around my “trading” strategy. This account consists roughly 30% of my assets.
I use this trading account to funnel realized gains periodically over to a large portfolio of stable, dividend producing stocks. This portfolio’s only concern is with accumulating shares of these companies for the sole purpose of consistent dividend payouts many years down the road (20+).
I don’t care about the price performance of these stocks…in fact, the cheaper, the better. I’m talking about the $MMM, $PEP, $PG, $JNJ’s of the world. I’ll always enjoy locking in a 4% payout in $KO for example. The portfolio holds between 40-50 stocks from all sectors. I like to use a large diversification to minimize the effect of a dividend cut/elimination (see $BP last year).
Yeah, this shit is boring as hell, and it’s tough to bang out twitter messages regarding your current positions “added 0.023% to $COF”…come on, but my goal in life is to have the correlation between work and money = -1.0. I’m not talking about being lazy, but being able to take advantage of *time* because I have that freedom and was efficient with money from a young age.
That’s the goal, at least.
Anyway, the third strategy I use is a really fucking simple binary transaction.
Long $SPY or long $SHY.
This evening I have entered each transaction this system would have triggered dating back 999 trading days (7/3/08) and here are some of the basic metrics:
- trades = 28
- Win % = 38.5%
- average win = 6965
- average loss = -1037.57
- Max loss = -3721.38
- Max gain = 19807.44
- Total percentage gain (7/3/08-present) = 52.90% (100k on 7/3/08 was ~153k after the last closed trade)
- S&P 500 gain (same period) = 7.26%
This performance is based on historical closing prices, slippage and commissions have not been taken into consideration.
The won loss percentage is skewed because a number of the trades into safety ($SHY) end up losing less than 1%, but are losses nonetheless. Cash is certainly a reasonable substitute, and might even provide slightly improved performance…something to consider.
I have been trading this since 10/24/11 and am up almost 7% in that time.
The reason I mention this tonight is because as of today’s close I flipped my $SHY for a new $SPY position. Whipsaws are always a factor, so that needs to be taken into consideration, but since the financial crisis started this has been a fairly reliable bullish indicator for the market as a whole.
If nothing else, it shows that the market is up for grabs right now, so we should pay close attention to what happens next.
Today I sold out of all of my $VXX weekly 17 calls at 0.62, 0.36, and 0.15 from 0.46…small loss. I almost sold out completely during the head fake. Hell, I even called that shit on Rhino’s blog last night, and I didn’t completely act on it.
The money was right there starting at me, and I chose to go light…even though I could smell that rally coming.
Live and learn.
My best to you all.
PS. Here is a table with all of the trades the aforementioned system has made if anyone is interested in taking a look at it.