Betterment?

[lazysundays]

It looks nifty and effortless. You need to readjust you AA, just tell the software/app the % you want. They pick low cost funds so brainless on your part. But it costs a free.
I think this could be useful for people who are totally scared of investing. And only need $100 invested to start.

[Ombud]

Not for those accustomed to trading.

[The Captain]

So how does one go from being a novice to being accustomed to trading?  I'd like to branch out a bit...

[Ombud]

IMHO:

Set up a % as a core account = safe and secure. Think indexes or a moderate ETF.

Then assign a % to an explore portion. Using a stock screen, pick 5 stocks that interest you. Start with 5 in different sectors to keep things interesting but monitoring manageable. My most primary screen is:
● trades at least 200k shares a day
● rated 5★ by S&P
● pays a dividend
● priced between $5-100
● 50 day ave greater than 200 day ave
Then I read their literature to see which ones might pop and set alerts once bought.

I hold 80% core [5 ETFs (SPY, SCHD, SCHA, PID, XLE)], 17% explore, & 3% reserved for option trading. My 'advisor' says I need fixed income securities but I just don't understand / am thrilled with bonds. (Truth time: have a few inherited CDs paying 3-5%)

[Deleted]

There really is no magic formula to become "accustomed to trading".

The stark reality is that one, must learn as they go.

The reason for this is that for each person (who Trades) finds what works for them & that may not work for anyone else.

Trading, requires good attention to detail, good research, the ability to be very nimble if things start to go sideways, the ability to be able to see when things are going wrong, the "Steel" to swallow the pride & take a loss instead of getting wiped out by a bad trade & a bit of luck.

Traders Lose & Traders Win. The trick is to have more winners than losers & have the amount of the wins be more than the cost of the losses.

Decent Traders probably average 3 wins to every 2 Losses. Skilled Traders probably average 6 wins to every 4 losses. The best of the best Traders probably average 7 or 8 wins to every 3 or 2 losses respectively.

But even the very best traders go through streaks where nothing seems to go right & that can get very discouraging, especially when losses begin to really add up..

Additionally, Active Trading can be very stressful, they are times in which an active trader can't sleep well or at all given the size or nature of a trade & that can & does get tedious.

Another thing to consider is that Active Trading can get expensive when it comes to fees. The more you trade the more it costs..

Rule of thumb: If you can't afford to lose the money, don't trade.

And that said, do what works for you.

[Ombud]

@di, you're more experienced than I am. What % of your portfolio do you trade or doesn't that factor in? Not talking investing long term but actively trading

[Deleted]

Ombud

Interesting inquiry. Not really sure how to answer it best, but then I am a bit odd in how I look at the entirety of what We (the Missus & I) do & how We do it.

{1} If we look at the numbers expressed as a percentage of "Face" {The Account Balances Tab @ our brokerage} then the formula would be:

Cash + Long Stock + Long Opt. - Short Opt = Account Value
Which then would mean that the most appropriate way to give a % would be to state the percentage that is cash; because Short Opt. Value is shown by the brokerage as a negative (Cost Current to Buy To Close); thus the Account Value is reflective of that drawdown on a daily basis.
That said the Cash as a % currently is 72.83%

{2} If we look at the "Backside" {The Other Balances Tab @ our brokerage} then the formula would be:

Long Marg. Value [/ by ABS of] Marg. Equity
Here Marg. Value is the CASH & Marg. Equity is the value of the entire account if the Short Opts. were Zeroed out (Expired Worthless). The Marg. Equity fluctuates day to day based on the reflective value of the account in relation to the movement of the Securities in the Account as they reflect due to their movement on the open markets.
That looking at it the way the Long Marg. Equity {Cash} would currently be 57.27%

{3} We could look at it from the P.O.V. of "What If" {Forward Estimate}; which then would mean subtracting the Sought Buy To Close Cost From the Cash Balance and then adding the Long Stock Value to seek the percentage. In that view Sought Buy To Close Cost Would Equal the Percentage.
That formula would be:

Cash - Sought Buy To Close Cost + Long Stock Value + Long Opt. Value [/ by ABS of] Account Value {Long Stock Value + Long Opt. Value + (Cash - Sought Buy To Close Cost)
In this view the percentage would be 48.93%

So there are 3 ways generally to look at it.
# 1. Would mean that the percentage would be 72.83%
# 2. Would mean that the percentage would be 57.27%
# 3. Would mean that the percentage would be 48.93%

We could also look at it from the P.O.V. of how Levered We are at present; which has 2 ways to assess the risk.
The first is simple; How many dollars would We have to Borrow to Cover Costs if every thing got assigned.
The second is more complicated & consists of the first above; then accounts for BREAKEVEN points, likely hood of closing above them [& Or] likely hood of having to close below them V. Potential Profits [& Or] Potential Losses.

To keep it as simple as possible from this view, We will use the first which would be:

Potential Liability / Account Value Current = 3.72 To 1

So Currently We would have to borrow $3.72 for every $1 Real Dollar We have to Cover Potential Liabilities.

We could look at it from the P.O.V. of Account Value Now V. Account Value EOY 2013 v. Realized Gains - Drawdowns for Living Expenses v. Cost/Value of "Expensing" + Carry Cost of "Expensing".
But that get complicated and is a delicate balancing act in that this accounts for any expenses deferred to our credit accounts + % against any balance there - payments made to pay those balances {if any} from any Drawdowns from the Portfolio.
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Or We could just say that it doesn't factor in {the % of the Portfolio used for trading}.

But, that would not be wholly true, honest or fair to reality. Or for that matter to anyone trying to understand the complexities of being more of an Active Trader versus a Buy & Hold Type Market Participant.
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May be though the most appropriate way to view our portfolio & give as best an answer as possible would be to look at Profit/Loss % rates. And to compare from last year to Current.

2013

Profitable Trades % = 81.25%
Losing Trades % = 16.95%
Total Trades = 160
Profitable Trades = 130
Losing Trades = 30
{A} Gain To Portfolio For Full Year: (Profitable Trades – Losing Trades) + (Dividends + Interest) – Drawdowns – Professional Fees {CPA} – Taxes = $21,204.63

{B} Our Living Expenses & “Expensing” Costs for 2013 were: $8,611.00
{C} Our Professional Fees & Tax Costs for 2013 were = $3,235.35

Our Living Costs amounted to $32.46 a day (B+C/365)

Our Full Year Taxable Gain amounted to $90.55 a day (A+B+C/365)

So We made 2.79x more a day than We spent.

(To be fair We do have 2 roommates; so We {the Missus & I} only are liable for half the costs of running the house)

2014 {So Far}

Profitable Trades % = 83.05%
Losing Trades % = 18.75%
Total Trades = 59
Profitable Trades = 49
Losing Trades = 10

Our Living Expenses & “Expensing” Costs for 2014 to date are: $3,587.92


So For 2013: We ran 4.3 Wins to every 1 Loss for the Full Year

So For 2014 To Date: We are running 4.9 Wins to every 1 Loss thus far

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We view & treat what We do & the actions We take as a business. To that end We accept & are willing to spend what is necessary to pursue Our business interests.

As to how Our Personal Lives relate to that, We are exceedingly frugal. We rarely spend anything that is not absolutely necessary. Every major purchase is done "Cash On The Barrelhead".

That may sound to many as a rather unpleasant way of life; but for us it works. There are plenty of things to do in life that do not require one to spend money from which one can derive true enjoyment.

Put another way; if We had $1 Million, We could walk away from the Equity Markets and even accounting for inflation We would have enough Money at that point to live for 80 years before running out of cash.

Which means the Missus would have to live to be 129 Years Old & I would have to live to be 120 Years Old before We would end up broke.

And as for any argument that "Well if you had $1 Million; you would probably spend more, so the assertion is off":

We can say no We wouldn't; Reason being We are comfortable, We live comfortably; We are happy with what We have: So why spend more than needed to chase the illusion of happiness portrayed by Companies trying to get folks to spend money via all the "You have got to have this" advertisements &  the keeping up with the Joneses mentality of the general public?

Put in my own unique way:

No one "needs" 90% of the crap they buy; nor do they need to waste the money it costs to buy that crap.

[Ombud]

Wow. That's a lot to keep straight. Mine is far more simplistic. I've only done 107 trades so far this year. I am comfortable with my long term strategy even though my Schwab advisor is not. I never really factor out the cost of buying or selling a holding, instead I average it into the cost of the security. What I compare is whether I make more in the explore account or if I would have made more in the core. To state it another way, do I make more active trading or I would I have been better off in an index? This year my active trading only slightly beats the index, by around 5%. Last year was better. Maybe that's bc I haven't done options this year, too busy with new job. 3% is set aside but it requires more than PT monitoring

That said, I do enjoy the hunt

[Deleted]

Ombud

Yes, it can get a bit tedious. Yet as We view & pursue what We do as a business; it is imperative that We know the exact amount % wise that any trade produces either as a gain or loss.

It is also imperative that We know just how much any given trade produced over the period We held it.

If say We were only able to make 0.20% per trade over our average holding period (33 Days Currently); then Trading would just not make sense. Reason being is that over a 3 month period with proper allocation The Amount of Capital We have could produce via Dividend is $3,500 which would exceed our Cost Of Living by 4.89x.

Thus, using Q1 as an example using what Dividend Income could have produced; The Dividend Income would have made us 38.51% more than We spent.

Yet, so far this year We are making 0.36% {on Average} per trade over our average holding period. Which means for Q1 for example our Profits exceeded our Cost Of Living by 5.73x.

Thus, We made 47.73% more than We spent.

Via Our Trading We actually made 9.22% More than We could have if We had just been in Dividend Producing Equities.

[Ombud]

Obviously I need to knuckle down and return to previous spreadsheets. I made more trading than working last year (LOL: under employed last year which helped). Ultimate goal is to build up a portfolio of dividend payers earning 2k dividends per month. 1/2 way there

But I'll still trade for enjoyment

[Deleted]

Ombud

Take a look @ {AT} Atlantic Power. Speculative, good bit of risk; yet cheap & pays a monthly dividend..

We have our eye there; as with the "right" amount of principal @ the "right" stock price - pretty decent Risk v. Reward  profile.

[Ombud]

Will do. My last pick was ZEN. Bought sold bought last week. No dividend, no options avail

[jarrett1]

As an Ed Slott "Master Elite Advisor"...

Betterment has called on me @ a rate of $500 to provide technical analysis for "complicated transactions" (rollovers, non-spouse beneficiaries, Roth IRA re-characterizations etc)

I would never trust a web site for any type of financial service because the suitability is lacking, the expertise is non-existent and you can't hold an individual (because if there is an error...the IRS will not give you relief from taxes or penalties UNLESS you have an individual you can hold responsible for your/their error)...so just like the rest of the internet...PLEASE BE CAREFUL!!!