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any utility to a "play" account?


Guest cherzeca
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Guest cherzeca

there is a saying in NYC that the reason why there are several very wealthy real estate families is that it was too hard for them to sell their holdings.

 

in today's WSJ, an author countered the notion that one's portfolio decisions should take into account one's political convictions.  his point is that equity markets have been resilient and consistent through potuses of various stripes.

 

his suggestion is essentially to leave the major portion of your portfolio unaffected by political orientation and, if this abstinence is too hard, set up a small "play" account to act on your political insights:

 

"2. Set up a play-money account. Many advisers view small trading accounts as a waste of time and a surefire way for clients to lose their money. I’ve learned over time that these accounts actually serve an important psychological purpose; Investors can scratch their trading itch without blowing up their portfolio. In an election year, an investor can set aside a small portion of their investable assets (no more than 5%) to invest based on their political preferences. If things work out, great. If they don’t, the remaining 95% of their portfolio is still structured prudently."

 

I think there is wisdom here, and that this is more generally applicable to one's portfolio beyond the realm of politics...could apply to various social/political/economic phenomena.

 

agree?

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I have never found play accounts useful, except to learn the mechanics of a particular platform or trading a particular product.

 

Better advice would be learning to manage your emotions and tame this "itch". Otherwise just buy SPY.

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Any time I'm wanting to take a punt on some stock, I always go back to Graham and WB:

 

"Shares are not mere pieces of paper. They represent part-ownership of a business. So, when contemplating an investment, think like a prospective owner." - Warren Buffett

 

From Chapter 20 of Benjamin Graham's book The Intelligent Investor:

 

"Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate in Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success."

 

That and the punch-card theory usually stops me from dipping into speculation.

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I have used play accounts for much the same reason as LC. Primarily to train in the mechanics of the asset class, and the associated emotional highs/lows. The bad times typically more valuable than the good. I have also used them to side-car long-term positions that I did not wish to sell - to prevent them from influencing the main portfolio.

 

Given your purpose, and location, the obvious choice is SPY puts. Simply because the changing election prospects are already part of the daily index. Make money, as long as the election result is likely to produce significant change, good or bad. Just be mindful that if you end up keeping the 'funny money', while those around you lost their shirts, you will be resented. Not a lot of fun, should the economy settle somewhere between the Great Recession, and the Great Depression, for a time.

 

SD

 

 

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Guest cherzeca

Any time I'm wanting to take a punt on some stock, I always go back to Graham and WB:

 

"Shares are not mere pieces of paper. They represent part-ownership of a business. So, when contemplating an investment, think like a prospective owner." - Warren Buffett

 

From Chapter 20 of Benjamin Graham's book The Intelligent Investor:

 

"Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate in Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success."

 

That and the punch-card theory usually stops me from dipping into speculation.

 

agree as to the 95% of your portfolio.  but why not consider a "special situations play account" even if only as for a hedge.  I happen to believe that the market goes down if biden wins on election night (or the subsequent night when all of the recounts and litigation ends), and more so if a D sweep.  I may want to consider buying some gun stock on anticipation that gun sales will go up if this happens.  is this speculation? sure. but if only for the 5% side account, this doesnt sound to me to be  unreasonable...especially if it helps you leave the 95% portfolio alone

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Any time I'm wanting to take a punt on some stock, I always go back to Graham and WB:

 

"Shares are not mere pieces of paper. They represent part-ownership of a business. So, when contemplating an investment, think like a prospective owner." - Warren Buffett

 

From Chapter 20 of Benjamin Graham's book The Intelligent Investor:

 

"Investment is most intelligent when it is most businesslike. It is amazing to see how many capable businessmen try to operate in Wall Street with complete disregard of all the sound principles through which they have gained success in their own undertakings. Yet every corporate security may best be viewed, in the first instance, as an ownership interest in, or a claim against, a specific business enterprise. And if a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to have a chance of success."

 

That and the punch-card theory usually stops me from dipping into speculation.

 

agree as to the 95% of your portfolio.  but why not consider a "special situations play account" even if only as for a hedge.  I happen to believe that the market goes down if biden wins on election night (or the subsequent night when all of the recounts and litigation ends), and more so if a D sweep.  I may want to consider buying some gun stock on anticipation that gun sales will go up if this happens.  is this speculation? sure. but if only for the 5% side account, this doesnt sound to me to be  unreasonable...especially if it helps you leave the 95% portfolio alone

I've heard before and thought about what you've said. It has the advantage of sounding reasonable but it never really made much sense to me. If you have a conviction on something you basically should act on it otherwise leave it alone. For example let's say that you have some gun stocks and whatever other else in this 5% bucket. Let's say that you land on the right side and some in that bucket go up 10% post election (not all will). Then you make what? 50 bps max? It's just not worth the trouble for that.

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Guest cherzeca

"It's just not worth the trouble for that."

 

one of my favorite sayings is that if nothing works, do nothing.  but I find it hard to do nothing, so I do something small

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"It's just not worth the trouble for that."

 

one of my favorite sayings is that if nothing works, do nothing.  but I find it hard to do nothing, so I do something small

If that's the case, then I agree with you. Better to do something small and inefficient than do something big and dumb.

 

I guess there's no right answer to thins. We should all do what works best for each one individually.

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There is definitely value to having specific accounts for different strategies. IE of you are looking to own large cap blue chips, there is no reason to be anywhere but IB. If you are taking concentrated positions in small caps, IB is probably the last place you want to be.

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I have found a IBKR simulation account useful to learn about the platform and do some trades that seems a bit more complex (foreign exchange, for sign stock). I also found a useful side benefit - you can use it to get real time quotes for foreign Exchanges For free so to speak. You just buy one share or lot of a stock in the foreign exchange and IBKR while not showing you real time quote, will show you the real time value, which is basically the same thing. Not a huge benefit, but I found it useful in some cases.

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For years I had a "crap shoot account" that was set up with 10,000.  i tried all my wild stuff in it. Was up to 40000 and down to 8000.  Found out leverage works both ways.  This account saved me a ton over the years and let me get some wildness out of my system.

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I think play accounts will just psychologically mess with you. Most people will take more risk than they should because it's not real money. And if they are lucky, they will lose all their fake money and learn a lesson out of it. If they are not, they will win a lot of fake money and then become overconfident with their real money.

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