Exit strategy from MF portfolio

I am ready to cut my losses and exit the MF portfolio I started a year ago and would appreciate some advice. Many moons ago (25 years) when I was a grad student with a couple of little kids, I did some active trading with a gift from my in-laws and MF was a huge resource and seemed really ethical. My active trading days ended when we got super busy with kids and work and because our retirement money was in 401k’s with only mutual funds as options (used mostly S&P500 index funds). So when my husband left his employer last year, it was an opportunity to explore buying more individual stocks (this was also spurred on by a close, and much younger, friend investing 200k in Tesla and reaching financial freedom by 35). So I checked out how my old resource MF might be able to help me get back into investing with stocks and ended up paying for a premium service. Bad timing, lack of research, and naivete, as well as poor guidance from MF, have resulted in a 15% loss over the past year in our portfolio. I lost 30k in the first month! The almost 200k we are now down, took a lot of work to build so this is hard.

I tried to be a good “buy and hold” investor and stopped checking my balances and then became afraid to even look. I thought I was showing the depth of my commitment to this type of investing. I finally came here to these boards and began learning a bit more and it is clear to me I need to pivot. I want to learn a lot more and stop relying on MF or other newsletters but that is going to take a bit of time so the question is what to do with my current portfolio of stocks. Do I sell them all immediately? Put some Stop-Limit orders in place and sell them off over a period of time? Do I go back to putting money into an S&P500 index for a short period? Having made this huge mistake, I am trying to learn as quickly how to minimize my risk for the next steps. I like investing and will enjoy the learning that is ahead of me but I don’t feel like I can leave my money any longer in these stocks that continue to tank.

We have 15 years to retirement and are still contributing sizable amounts to our retirement funds.

Thanks for any advice!

Not an easy answer Bloodking, depends on a whole lot of variables.

This is a tough time in the markets. We are in a cyclical bear, but still in a secular bull. We are possibly going into a recession (although likely only a few quarters at worst). Have to guess we will have a tough couple quarters of mainly chop. We might go back down in the next few weeks, but maybe not. Have to assume you are negative in your positions. The response really depends upon what your positions are at this point. You’ll have to look at each one and make decisions if you think it’s better to cut loose or if there is the possibility of improving in the next few months. It’s okay to sit tight, learn and invest new monies as you become more comfortable. Regardless, remember, cash is a position.

I know, not an answer, but you have to come up with what fits best for you.

Feel free to ask questions, learn. You have time.

Lakedog

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bloodking6,

Down $200K? If that loss is just 15% of total AUM, then you’re not as damaged as you think you are, but you need to stop further losses. There are several ways to do that. Selling some or all is one of them. Another would be to get yourself market-neutral (with puts or inverses) to give yourself time to rethink your goals.

Yes, TMF sucks when it comes to risk-management, because they don’t care about the losses their subscribers sustain. Also, the TMF’s culture is very “male”, which means it is very prone to taking irresponsible risks.

It ain’t PC to say so. But men and women don’t invest the same, nor should they try to do so. The differences are innate, genetic, and hard-wired. You need to find a role model you can relate
to, and it’s not Suzy Orman, much less Cathy Woods.

If you’re more of a ‘trader’ than an ‘investor’, I’d say to track down the books and lectures of Linda Raschke or Toni Turner. But the two books you really need to read are Ben Graham’s, The Intelligent Investor and Justin Mamis’, The Nature of Risk. They will give you the overview of the investing process that TMF failed to provide you.

Also in your readings, you ought include a good intro to the 16 personality types as popularized by Meyers-Briggs, because each personality type thinks about money and risk differently. Once you know who you are, you’ll find it easier to choose a path that makes sense to you.

Arindam

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Hi bloodking6 -

I’m not allowed to give individual investing advice. And given the “TMF” prefix on my user ID, you probably wouldn’t want to take any from me anyway at the moment, even if I could.

All that said, I’ve never really followed the Fool’s more aggressive growth strategies. The downside to that is that I missed out on a lot of rapid growth and stellar returns when things were going up, but the upside is that in the current market, I’m holding up reasonably well.

The key lesson I learned early in that journey is that every strategy has trade offs and risks. I chose the path I did because I recognized that a “good enough” strategy that I could keep investing with even as times got tough beats a potentially superior one that I can’t keep investing with when things get rough.

I say this because I can’t predict the market any better than you can. But what I can do is put myself in a position where I can have a better shot of making reasonable choices when the market does whatever it is that it will do.

So the key strategy I follow is one that tries to balance dividends, valuation, balance sheets, and diversification. It doesn’t light the world on fire, and I haven’t figured out a way to trounce a rapidly rising market. But what I have done is built a plan that has a decent shot of meeting my family’s key long-term financial goals and that I’ve been able to keep with even in the 2022 market.

Why this matters to you: as you and your husband work through your next 15 years until retirement and then a hopefully long, happy, and healthy retirement after that, you will need to make peace with your money and find a strategy — or a set of evolving strategies based on your age and working status — that you can stick with and that offer a decent chance of meeting your goals.

There’s no shame in choosing a path other than aggressive growth. Just recognize that every investing strategy has risks and trade offs. Right now, aggressive growth is out of favor and it has been rough following that path. Not so long ago, on the other hand, I felt downright stupid watching the Fool’s more aggressive growth strategies clock in with stellar returns while I wasn’t. Tomorrow? Well, if I could predict it reliably, I’d be a multi-billionaire…

Regards,
-Chuck
Home Fool

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“I say this because I can’t predict the market any better than you can. But what I can do is put myself in a position where I can have a better shot of making reasonable choices when the market does whatever it is that it will do.”

Froggie,

Permit me, if you will, to rephrase what you said. Yes, none of us can reliably predict how the future will play out, though it is possible --and even necessary-- to make probabilistic guesses about its outcomes.

If --on some very bad advice-- one buys shares in Tom & Dave’s Magic Beans Company, there are only five things that can happen. The price of those shares goes sideways, and the trade is a scratch. Prices go up a bit for a modest win, or down a bit for a modest loss. Or up a lot for an egregious win, or down a lot for an inexcusable loss. And I deliberately say 'inexcusable", because every punter knows ahead of time that losses on the bets one is making are a possible outcome. Some plan for that possibility and set cut-loss points. But most don’t, and they suffer accordingly. Oh, well.

Wm O’Neil suggests (-8%) is a good cut-loss point regardless of the stock being bet on. Others suggests setting stops according to the volatility of the underlying. Still others use other schemes. But the common theme is this. All of them agree that they are going to make mistakes about the direction of prices and that a means to repair those mistakes has to be put into place BEFORE the trade is initiated.

There’s a proverb that’s apropos here. “Good traders cut losses promptly. Great traders reverse.”

A friend of Soros was playing tennis with him and asked what he was buying. George said such and such. A week later when they played again, the friend said he was sorry to hear George had lost so much money. George looked at him puzzled and said, “I made a killing last week.” Now it was his friend who was puzzled. "But you said you were long (wheat or cotton or the Franc or whatever) and prices had dropped like a rock. George replied, “Things didn’t feel right. So I reversed.”

Is “the market” always right? Fat chance of that happening. But when prices move against you, it behooves one to ask who’s wrong about the trade(s) one is in. Sometimes, humility leaves a bit of money on the table. More often, it prevents an avoidable loss.

Arindam

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While I’m on a roll with this, let me offer one final bon mot.

There’s a sign on my dentist’s wall that reads, “You don’t have to floss all of your teeth. Just the ones you don’t want to lose.” The same applies to “investing”. You don’t have to trail all of your positions with a stop. Just the ones on which you don’t want to suffer significant and avoidable losses.

For sure, the paranoid are sure that if they trail a stop, it will get hit by them naughty traders, running the stops. But there are ways to avoid that problem while still maintaining a level of price protection.

Arindam

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Arindam,

Thank you for the suggestions on how to implement some protection for future losses. I also appreciate you pointing to general differences in investing by gender and personality type. I imagine these two factors also interact. On reflection, I can see where I have been trying to invest in a way I thought I was “supposed” to and that is actually counter to my personality type.

I will definitely check out Linda Raschke and Toni Turner. I had started reading Ben Graham’s, The Intelligent Investor but feel like I might need some sort of primer first.

If you don’t count my cash positions in calculating AUM, then I am down 20% :frowning:

bloodking6

Chuck,

I really appreciate you sharing your approach - including the times it feels hard. I am indeed starting to understand how important it is to take the time to get clear on and commit to an overall strategy for the long haul that fits our realities while ignoring the distractions.

M

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https://discussion.fool.com/a-good-example-of-what-not-to-do-350…

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“On reflection, I can see where I have been trying to invest in a way I thought I was “supposed” to and that is actually counter to my personality type.”

BINGO! That’s a welcomed bit a news. You’ll make it.

Actually, Graham’s book is the intro, and what most don’t realize is what a dry-witted, standup comedian he is who tries to put the emphasis in investing on the personality of the person doing the investing, not on the externals of markets.

Regrettably --but predictably-- the financial world is (nearly) monolithically male-dominated. But there are also some really sharp gals in it, e.g., Danielle Demartino Booth, who are more than worth tracking down and paying attention to. Heck, if you want inspirng story of someone who was initially dismissed as yet another “money honey”, read Maria Bartiromo’s book. 25 years later, she still in the game and still covering stories that matter.

‘Gender’ isn’t the important issue, nor what really matters, not when there are reckless idiots like Cathy Woods who get attention just because they are ‘female’. What matters, as Alex Elder lays out in his books, is the combo of Money-Mind-Market (whose explaining is a post for another time).

Suggestion: The Leftists are going to try to keep stock prices propped up until the midterms. So you’ve got some time get things straightened out. But if past is prologue, traders are going to start selling this market down when they come back from summer vacations. Things might blow up sooner, especially when it becomes obvious that Putin has prevailed in Ukraine and the non-aligned countries --India, China, all of Latin America, etc.-- increasingly bypass the $US in their trade among themselves.

Arindam

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bBloodking,

An article you might might helpful. https://www.zerohedge.com/markets/7-rules-long-term-investin…

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Personally, I think one year on a 3-5 year journey is too soon to give up on a time tested investment Foolosophy. With 15 years ahead of you, there is plenty of time for companies in which you have conviction in their long term (3-5 years or longer) business growth to realize their potential.

Just be clear with yourself whether you are making investment decisions because you are unhappy with the market performance of your positions or because you have lost faith in the fundamental investment theses of your invested companies.

If you are set on selling, one strategy would be to divide your companies into 4 groups. The first group is No Way In Sell Do I Part. These are the companies in which you have the highest conviction and would not want to sell even if the earth was coming to an end. The second group is It Would Really Bum Me Out To Sell. These are companies in which you have strong conviction but it wouldn’t make you question your faith in all things Foolish if you did.

Then the third group is It’s Not Like I’m Married To This Company, investments in which you have a positive conviction in their future potential but you wouldn’t lose any sleep if they weren’t in your portfolio. And finally the fourth group, What Was I Thinking?, includes those companies in which you have the least conviction or cannot remember what they do or why you opened positions in them.

Then, once you have your portfolio organized, you take the last group and rank each company in order of highest conviction to lowest conviction. Then you start liquidating from the bottom of the list. Easy peasy, right?

Fuskie
Who notes if you’re wondering what “conviction” means, it’s the depth of feeling you have in a company’s ability to achieve its growth potential and succeed as an investment over the long term…


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“Personally, I think one year on a 3-5 year journey is too soon to give up on a time tested investment Foolosophy. With 15 years ahead of you, there is plenty of time for companies in which you have conviction in their long term (3-5 years or longer) business growth to realize their potential.”

Fuskie,

I’m glad to see that you “eat your own cooking”.

I took the trouble to enter the tickers of the stocks you say you own into a portfolio tracker. On a 1-year lookback, your holdings are down by an average of (-14.28%), with your most egregious loss being (-80%). Ouch! I’d have cut my losses at Wm O’Neil’s recommneded (-8%). But to each, his own.

Of the stocks you say you own, 15 are no longer trading on any US exchange for the company likely having ceased to exist. (Opps. Talk about having “conviction” until the bitter end.)

Of the remaining 135 of your holdings for which it is possible to find price data, 69% of them are trading at a loss (when a 1-year lookback is used). That is nearly the exact opposite of the right/wrong ratio you claim that following the investing advice of TMF should offer would-be subscribers. So why the differnce betweeen “theory” and “reality”? I thought the purpose of “investing” was to build welth, not lose it.

Arindam

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Arindam,

Mr. Foosie has to be a poor HODLer. With the amount of intelligence he possesses, he should not have lost a single dime.

I went over the top five on the list for ha ha’s and came up with on average 21 out of 21 successful trades without a loss. Zero losses since the " V ".

If he has been shadowing me, he knew how to trade like a Swing Trader.

TRIP had 22 out of 22 successful trades with 0 losses. It is easy to name ticker symbols and not follow them, own them and correct his positions.

I am going on a limb, he never owned any of them, and guess he only owns DIS. DIS had 22 out of 22 successful swing trades with zero (0) losses.

If he is anything like the Gboyz, I would never ever take their recs or holdings as gospel.

If he wants to be a millionaire or more, he & co., Should only own Swing Trade AAPL : MSFT : SPXL: GDX: ETHUSD . Use the power of compounding along the journey.

Quill -

Looking at my holdings tells you absolutely nothing about the success of my portfolio. You don’t know, for example, how long I have held these positions or when they were started. So to pick and choose a short-term window to assume a failed performance of my portfolio would be disingenuous and paint a false picture of my success. It also lacks context of my personal financial situation, where I am on my investing journey and other rules under which my investing decisions have been regulated.

Fuskie
Who notes all but one of his positions has been held for at least 3 years and more than half for over a decade, so he does indeed walk his talk and contrary to this limited analysis, will be in terrific financial position when he retires in a few years, well beyond what he could have imagined 25 years ago when he first became a Fool…


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Sir,

On the contrary. Looking at the losses you are tolerating proves you shouldn’t be telling anyone else how to manage their money.

As to how well you will or will not be when you retire is easy to predict. The coming crash --and decades long depression-- will increase your loses beyond recovery.

Can’t happen? Won’t happen? Well, just ask them who had money in the bubble market of the late '20s. It wasn’t until '46 or so that prices began to recover. Meanwhile, inflation had significantly eroded purchasing power.

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Fuskie,

Thanks for sharing this approach. You raise some good questions. I have a fair amount to study and digest to come to a place where I could put companies in these categories in an informed way. My approach to paying for a premium service was to pay for the research and analysis of TMF. Following these recommendations, I was holding almost 70 positions. Too many for me to really have an investment thesis for each company or to track them, especially as I run my own company.

I recognize that a pattern I am seeing in myself - and think is a hindrance to smart investing - is getting attached to particular stocks - like having a category never wanting to part one. This can be both as they grow in value and as they sink. Trying to idealistically buy and hold every stock resulted in me watching some tank to being -92%, -89%, …

bloodking6