Experienced, Need your help whether I am right

Experienced, Need your help whether I am right or wrong.

First, let me introduce myself. I started trading experience between 2005 to 2008 with $5000. Every year, consistently made loss, max $2000, and filed tax loss.

Stopped from stocks for sometime 2008 to 2012,but invested in real estate. This gave me 235% return over my initial investment, increased my wealth and providing me good capital cash flow.

Then, came to fool.com, read systematic news analysis, books to make myself educated on trading.

From 2011 onwards, based on my friends suggestion, started trading with $200k my 401k SDA money. 20% gain in 2013, 10% gain 2014 and now 25% gain in 2015 so far. It is pure trading on tech sectors being at silicon valley. All I understand is this is trading,speculating but not investing.

Based on many investing feedback from fool members, financial planners suggestions and many books suggestion, I set aside another 200k with mutual funds since Jan 2015. Funds are HACAX, RERGX, DODBX , RWIGX, FSEMX and BPSIX. They are almost equally distributed and not yet re-balanced.

Unfortunately, it is not going anywhere but 5% to 7%.

Now, I am kind of confused whether I am doing right or wrong on speculating or trading or investing.

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Now, I am kind of confused whether I am doing right or wrong on speculating or trading or investing.

Hi jiltin,

I’m not really sure what you’re asking. I’m guessing others don’t either since you haven’t gotten any responses. :wink:

If you’re asking if people here encourage speculation or short-term trading, I think the answer is a resounding No. We are investing for the long-term: and by that, I mean we are becoming part-owners of businesses with an eye to participating in the future success of those businesses. We won’t always be right, of course, and not every investment will be successful: but the successful ones tend to generate more wealth over time than the losses from the unsuccessful ones, and so our portfolios as a whole grow and compound over time.

Saul has written a great document that goes over his approach and philosophy: you can read it by clicking on the “Saul’s Knowledgebase” link on the right side of the screen. If you feel like you need a bit more investing background, though, I’d recommend reading Peter Lynch’s book One Up on Wall Street as I think it serves well as a very readable and solid introduction to investing, and also seems mostly compatible with Saul’s approach. There are a lot of other great books too that I’d recommend reading over time.

You mention that you’re in mutual funds: I won’t say that mutual funds are good or bad, but I don’t think most people here use them – I certainly don’t, and Saul has said he doesn’t. He talks a little bit about that in his Knowledgebase document. I personally think that you’re always better off managing your own investments, even if that just means following along with a proven real-money portfolio service like Motley Fool Pro to start: at least you’ll be learning and gaining experience along the way, and you won’t have to deal with the myriad conflicts of interest that impact professionals and mutual funds. Even better, of course, is to pursue the goal of “learning to fish” for yourself over time :wink:

There is no getting rich quick in the market. Building wealth over time primarily relies on two mathematical ideas: first, that a bad investment in a company can only lose 100% at most while a good investment can earn many, many times that over the years; and second, the magic of compounding that allows your portfolio to work ever harder for you as it grows. Trading in and out tends to be destructive, compromising the math that otherwise works in your favor. You also are competing directly with brilliant people on Wall St. when you’re trying to profit from a short-term trade, since that’s what they’re all doing too: by looking out further, and expanding your time horizon, you suddenly become able to take advantage of opportunities that professionals are ignoring because they’re worried about getting fired if they don’t generate that profit right now.

Finally, one more thing I’d offer is that I personally believe there are a lot of paths to success, including in investing. Given that our worst enemies are likely to be ourselves and our emotions and natural human biases, often the best path for any given person is the one that matches their temperament. So if you’ve found something that works well for you and that you’re good at at confident in (like real-estate) then maybe that’s the approach that ultimately makes the most sense for you. I’d still encourage you to study other approaches (there’s always something to learn), but be open to the idea that you’re already on the path that’s best for you.

This is all just my opinion, of course. Hopefully others will chime in. And if I completely missed the gist of your question, please feel free to post again and clarify it a bit. :wink:



As Neil said jltin there are many ways to invest, and, of course, many ways to speculate. Just for clarification I define speculation as buying something for the sole purpose of selling it to someone else at a higher price. There is nothing wrong with speculation and there are speculators in every market. I can give you an example of each in my own case. I bought INFN years ago on the belief that their product would be successful and that I would participate in that success at some point. It took 7 years just to reach that point. Along the way I suffered as the company lost money, struggled to gain acceptance of their product, fought off competitors, just as any owner would. Finally, I was rewarded as the company began to be rewarded with sales. That to me is investing. Last fall MDP decided to sell Tile Shop Holdings, the stock got crushed that day, I don’t know if it was all due to MDP’s sell recommendation or not, but I bought a huge position, simply because I felt it would rebound from that sell off. That was 8 months ago and last week I sold 2/3 of that position for a 100 percent gain. To me that was pure speculation on my part. Some call it a trading position, which it was, but I bought the stock not to participate in it’s future growth, but because I was confident that I could sell it to someone else in the near future who either wanted to sell it again at a higher price, that is another speculator, or to an investor who did want to participate in the future good, or bad fortune of the company.
I don’t want to put words in your mouth, but could it be that instead of speculation you meant to say guessing as opposed to an informed investment decision. I think most of us have gone through the guessing part of investing in equities. We see something or hear something and jump in and buy on a hunch, or a guess, or a hope. That is definitely not good, and I think many people would equate that to speculation, but I don’t. It is just guessing. So if that is what you intended to say then you are right to ask for help. And for sure read the book Neil suggested, and continue to educate yourself in ways to better invest, and if it suits you speculate.
Good luck