Increasing risk appetite

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Topic Author
am
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Increasing risk appetite

Post by am » Sun Nov 17, 2019 12:20 pm

I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?

retired@50
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Re: Increasing risk appetite

Post by retired@50 » Sun Nov 17, 2019 12:29 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
My suggestion would be to make sure the 20k you're going to devote to this process is a tiny percentage (under 5%) of your assets. You'll get the fulfillment if it works (and maybe some regret that you didn't commit more to the process) OR you won't be hurt too badly if it fails...

Best of luck,

averagedude
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Re: Increasing risk appetite

Post by averagedude » Sun Nov 17, 2019 12:32 pm

It is better to increase your appetite for risk after markets crash, not when they are at all time highs. This is where it might be a good idea to have an investment policy statement. This way you follow your investment strategy by what you have in writing, instead of investing by emotion such as fear or greed.

MotoTrojan
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Re: Increasing risk appetite

Post by MotoTrojan » Sun Nov 17, 2019 12:33 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
Depends what $30K represents. There are more reasonable bets you could make such as a small and/or value tilt, which have underperformed (see above reply).

I moved about $21K into a less leveraged variant of hedgefundie’s portfolio myself but I’m early accumulator and it’s a double digit percentage of my portfolio (only about 1/2 of a year’s contributions though). It’s over $30K now so I’m still holding on ;). I think as long as you have a clear plan it can’t hurt. X% of contributions is always better than X% if portfolio since the latter can be refilled and expose far more than X% to loss.

dbr
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Re: Increasing risk appetite

Post by dbr » Sun Nov 17, 2019 1:27 pm

I've never done that but the answer to reasonable is that anything is reasonable if you have thought rationally about the consequences and decide accordingly to do it. For example, if you want to set aside $50,000 and mentally consider that that money does not exist anymore and all your ordinary plans are still fine, then I would call that reasonable.

Perhaps another thought about that is to compare what spending that $50,000 or giving it away would do for you compared to what investing in risky investments would do for you. For me investing in something risky would not be as interesting as spending the money on any variety of things, or giving it away. But I don't know what your incentives and rewards are.

marcopolo
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Re: Increasing risk appetite

Post by marcopolo » Sun Nov 17, 2019 1:32 pm

These are the kinds of posts (as opposed to endless stream of "should I buy at market peak?", "2% is too risky SWR given low expected returns", etc), that really make me start to think that we may be nearing the end of the bull run. Although, nothing actionable...
Once in a while you get shown the light, in the strangest of places if you look at it right.

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JoeRetire
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Re: Increasing risk appetite

Post by JoeRetire » Sun Nov 17, 2019 1:43 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
Of late my desire to “play the markets” has increased.
Why?
Don't be a lemming.

Topic Author
am
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Re: Increasing risk appetite

Post by am » Sun Nov 17, 2019 1:54 pm

JoeRetire wrote:
Sun Nov 17, 2019 1:43 pm
am wrote:
Sun Nov 17, 2019 12:20 pm
Of late my desire to “play the markets” has increased.
Why?
Don’t know for sure. Probably greed, boredom with just a 3 funder, trying to get closer to my number faster. Coming here for support.

retired@50
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Re: Increasing risk appetite

Post by retired@50 » Sun Nov 17, 2019 1:56 pm

am wrote:
Sun Nov 17, 2019 1:54 pm
JoeRetire wrote:
Sun Nov 17, 2019 1:43 pm
am wrote:
Sun Nov 17, 2019 12:20 pm
Of late my desire to “play the markets” has increased.
Why?
Don’t know for sure. Probably greed, boredom with just a 3 funder, trying to get closer to my number faster. Coming here for support.
Take up a new hobby. How about carpentry, or bird watching, or biking, any of which could be less expensive than chasing an investing strategy.

Regards,

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JoeRetire
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Re: Increasing risk appetite

Post by JoeRetire » Sun Nov 17, 2019 1:57 pm

am wrote:
Sun Nov 17, 2019 1:54 pm
JoeRetire wrote:
Sun Nov 17, 2019 1:43 pm
am wrote:
Sun Nov 17, 2019 12:20 pm
Of late my desire to “play the markets” has increased.
Why?
Don’t know for sure. Probably greed, boredom with just a 3 funder, trying to get closer to my number faster. Coming here for support.
Greed is not good.
Boredom can be cured through a hobby.

Hope that helps.

If that doesn't work, take the $20k and put it all on red. Hopefully that will be a cure.
Don't be a lemming.

Topic Author
am
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Re: Increasing risk appetite

Post by am » Sun Nov 17, 2019 2:03 pm

Isn’t having a fun portfolio as small % of assets ok, even per Bogle?

retired@50
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Re: Increasing risk appetite

Post by retired@50 » Sun Nov 17, 2019 2:04 pm

am wrote:
Sun Nov 17, 2019 2:03 pm
Isn’t having a fun portfolio as small % of assets ok, even per Bogle?
Sure, see my original post.

Regards,

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JoeRetire
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Re: Increasing risk appetite

Post by JoeRetire » Sun Nov 17, 2019 2:09 pm

am wrote:
Sun Nov 17, 2019 2:03 pm
Isn’t having a fun portfolio as small % of assets ok, even per Bogle?
You don't need anyone's permission to have fun, not even Bogle's.

You were happy for 12 years, but now you aren't. Is $20k enough fun? $30k? $100k? All of it?

Lots of bad habits start out small and due to boredom and/or greed. I'm sure it will be fine as long as you can afford it. I wish you well.
Last edited by JoeRetire on Sun Nov 17, 2019 2:12 pm, edited 3 times in total.
Don't be a lemming.

dbr
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Re: Increasing risk appetite

Post by dbr » Sun Nov 17, 2019 2:10 pm

am wrote:
Sun Nov 17, 2019 2:03 pm
Isn’t having a fun portfolio as small % of assets ok, even per Bogle?
Of course it is ok if it is. This sort of thing is an individual decision about what a person wants to do with their money. It would be ok to take large risk with all of one's money if that is what someone wants to do. What is not ok (meaning rational or recommended -- by someone or another) is when a person expects one outcome and does something that is not likely to generate that outcome. The idea of the small % is that no matter what happens to that money the result will be of no consequence. A person for whom losing all their money would be of no consequence could risk all their money.

As the post above says, you don't need permission.

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Wiggums
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Re: Increasing risk appetite

Post by Wiggums » Sun Nov 17, 2019 2:24 pm

Diehard BH, but now you want to experiment? If you’re going to steer the ship in a new direction, why so little money? Here’s the problem. Everyone is making money in this low interest rate, reduced tax environment. We are in fantasy land right now.

If this is a short term experiment, you might as well stick with the three funder.

If you want to give the new funds a chance, you need to hold them 5 or more years.

It’s your money. Let’s us know how it works out.

UnhandledException
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Re: Increasing risk appetite

Post by UnhandledException » Sun Nov 17, 2019 3:06 pm

This topic comes up a lot. I don’t know if this helps, but here is why I don’t play the markets.

I’m a smart guy (or at least I like to think I am and that is all that matters in this context). Before I became a Boglehead, I actively invested in individual stocks. I’ve been a 3-fund investor for decades, but my brain constantly tells me that I can probably beat the market. Even though I know the odds are against me, my otherwise rational brain clearly does not accept that at some level.

When I speculate on stocks and I lose against the market, I have two choices. I can accept responsibility, or I can blame the market. My subconscious is going to choose the irrational market explanation every single time. I will have lots of reasons why my timing was off, or there was a one-time outside influence, or it was just a side-effect of the greater market this day/week/month. I’m simply not going to admit that I am an idiot every time I lose to the market.

When I speculate on stocks and I win against the market, I have two choices. I can accept responsibility, or I can blame the market. My subconscious is going to choose that me being a genius is the most likely explanation every single time. No matter what happens, my success will be due to my ingenuity, my deft timing, my willingness to take big risks, or whatever makes me feel smartest. I’m simply not going to admit that I very likely just “got lucky”.

So, in my case, whether I win or lose in this game of stock picking, I am feeding my mind the wrong message. It is a no-win scenario. I believe that if I want to take on more risk, I should adjust my asset allocation. I also believe that the less I listen to that little voice in my head that tells me I am a genius and can beat the market, the better off I will be financially. Given those beliefs, it would be counterproductive of me to feed that part of my mind that is always trying to get me to violate my IPS.

If I want to gamble, I do it in a way that my brain knows that it is gambling. I don’t deceive myself into thinking that I am a great slot machine button pusher. And while gambling is certainly taking on more financial risk, at least I know it is not affecting my investment risk, because gambling is not an investment.

I don’t know if any of this applies to you, but I would encourage you to think very deeply about why you want to do what you propose and if it is good for you to do so. For me, I won’t be allocating any part of my portfolio towards an activity that trains my brain to work against my best interests.

I know you said you are on track for retirement, but I think a lot of people may not be in that position. If they are behind on their investing, they may need to save more, earn more, or possibly make some hard choices about how they are spending, or where they are living. I hope nobody will use “playing the markets” as a way of avoiding harder decisions that are more likely to produce the results they want.

I wish you the best in whatever you choose for yourself.

Rosencrantz1
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Re: Increasing risk appetite

Post by Rosencrantz1 » Sun Nov 17, 2019 3:21 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
Strongly agree with those that indicate "you don't need permission". I remember reading/hearing somewhere that one individual funded their retirement goals by buying nothing but Apple stock - starting buying in the late 1990s and added to their holdings ever since. Probably not hard to imagine he's doing okay with that very fortunate pick. I guess my point is that while I can appreciate (and generally follow) the "buy the market" mantra here on BH, I've also been a buyer of some very specific sector ETFs that, in my view, hold some promise for potentially higher performance over the next few years (they most certainly have over the past 4-5 years I've been buying them and, to answer your question, yes I'm still holding on to those sector funds).

One word of caution - - I'd take your desire to "play the markets has increased" comment with a healthy dose of reality.... and, the reality is that when the "average joe" starts feeling that way about equity investing, it generally indicates, IMHO, a very frothy stock market. Buyer beware...

averagedude
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Re: Increasing risk appetite

Post by averagedude » Sun Nov 17, 2019 3:38 pm

Others have said " you don't need permission", but if you have a spouse, you should think really hard before doing this.

Fallible
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Re: Increasing risk appetite

Post by Fallible » Sun Nov 17, 2019 3:54 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? ...
I've boldfaced areas of your post that I think question whether your "desire" is reasonable.

_The first is that desire itself is a strong emotion and a dangerous one on which to base money decisions. Being an investor, you are familiar with emotions; being a Boglehead, you would be familiar with how to control them. This is where the value of an IPS comes in, as mentioned by another poster here; do you have one that can help you now?

_The second is that you are basing the desire on anticipation and assumption when you say you "Anticipate basic financial independence early 50s assuming no big bear or other negative event." Is that "reasonable"? I think it's reasonable to never assume, especially when it comes to the stock market.

_You say you've been following "risky" etfs and stocks "for years." So the desire to increase risk apparently has been there awhile, just waiting for a tempting trigger(s). An IPS, written before desire strikes, can warn you of these temptations and advise how to handle them in a way that is right for you.

These points should not be new to a 3-fund Boglehead. They are just reminders of why you've benefited from this strategy and could be better off just staying the course and spending the "fun" money on another, financially safer and perhaps more rewarding area of your life. And we all need reminders. :happy
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

bluquark
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Re: Increasing risk appetite

Post by bluquark » Sun Nov 17, 2019 4:52 pm

IMO if you want to take more risk to get better long-term returns, increase the stock portion of AA but keep it in the three-fund portfolio. If you want to play with a toy fancy strategy for the sake of intellectual curiosity and entertainment, invest in that literally the bare minimum possible to execute the strategy (i.e. 1 share of an ETF, or a fractional share of stock on Charles Schwab). If you have both inclinations, then do both.

"Play" money is fine as long as it's literally what the word implies. Just like how gambling substantial sums isn't a great plan but penny-ante poker is a fine way to fill the time. I think the two goals don't need to be mixed even to the level of 5-10% of portfolio.

(As for my suggestion of potential AA increase, there is the wisdom that you shouldn't let greed take over in a bull market, but there is also the wisdom that new market peaks are also often new floors and nervous folks should just go ahead and lump-sum invest. As usual, financial rules of thumb cancel each other out and are not much of a guide to decisionmaking. If you have good reasons, clear judgment, and most importantly commit to not reversing your aggressive AA in a crash, it's as good a time as any IMO.)
Last edited by bluquark on Sun Nov 17, 2019 5:12 pm, edited 1 time in total.

Gill
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Re: Increasing risk appetite

Post by Gill » Sun Nov 17, 2019 5:07 pm

marcopolo wrote:
Sun Nov 17, 2019 1:32 pm
These are the kinds of posts (as opposed to endless stream of "should I buy at market peak?", "2% is too risky SWR given low expected returns", etc), that really make me start to think that we may be nearing the end of the bull run. Although, nothing actionable...
Ain't that the truth...
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Trader Joe
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Re: Increasing risk appetite

Post by Trader Joe » Sun Nov 17, 2019 5:09 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
No, this is not reasonable to me. No, I have never done what you have described.

rascott
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Re: Increasing risk appetite

Post by rascott » Sun Nov 17, 2019 5:24 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
Yes it's totally reasonable... if it's a small (under 10%) part of your world. None of what you describe are really high risk strategies.

Now if you were saying you wanted to start trading short- dated options or something.... that would be as useful as going to ther casino.

cashboy
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Re: Increasing risk appetite

Post by cashboy » Sun Nov 17, 2019 6:02 pm

am wrote:
Sun Nov 17, 2019 12:20 pm

Is this reasonable?
for me, no. i look at my investments as something not to be played with (and i do not mean that in a bad way).

but, i can understand your post as 3 fund can be boring at times (and i mean boring in a good way). :happy
am wrote:
Sun Nov 17, 2019 12:20 pm

Anyone else do something like this? How did it turn out and did you hang on for long?
if i was going to do this i would do it 'on paper' for several months to see how it goes before actually selling and buying.

good luck!

:sharebeer
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CD - CASH - Canned Beans - Rice - Bottled Water)

harvestbook
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Re: Increasing risk appetite

Post by harvestbook » Sun Nov 17, 2019 6:18 pm

Even if you win the lottery, that doesn't mean you weren't a fool for having played.
I'm not smart enough to know, and I can't afford to guess.

averagedude
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Re: Increasing risk appetite

Post by averagedude » Sun Nov 17, 2019 6:26 pm

Didn't Jack say something about your investments should be boring? Sorry Taylor, I beat you to it.

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1789
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Re: Increasing risk appetite

Post by 1789 » Sun Nov 17, 2019 6:30 pm

You could just forget this idea and spend time with something else. Biking would be a great hobby to start if you haven’t tried yet.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

livesoft
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Re: Increasing risk appetite

Post by livesoft » Sun Nov 17, 2019 7:15 pm

am wrote:
Sun Nov 17, 2019 2:03 pm
Isn’t having a fun portfolio as small % of assets ok, even per Bogle?
Doing something else with a small % of assets will not materially change your portfolio total return and may be cheaper than a hobby like golf, car racing, or sailing.
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TheDDC
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Re: Increasing risk appetite

Post by TheDDC » Sun Nov 17, 2019 7:28 pm

Just pile it into 100% VTSAX with a pitchfork.

Markets are usually at an all time high. They should be since that’s sort of how we rely on it to provide for income.

Happy bundling.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth...

Designairohio
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Re: Increasing risk appetite

Post by Designairohio » Sun Nov 17, 2019 8:24 pm

I wouldn’t do it,
I put 25,000 into 3 cannabis stocks a few years ago I thought they were a sure bet. Now they are worth around $8,000
If I would have let them ride in vtsax I might have 30-35,000 and would be that much closer to my retirement number
Don’t gamble just stay invested

UpperNwGuy
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Re: Increasing risk appetite

Post by UpperNwGuy » Sun Nov 17, 2019 8:32 pm

Why are you writing to the Bogleheads seeking an endorsement of a very anti-Boglehead investment strategy?

Topic Author
am
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Re: Increasing risk appetite

Post by am » Sun Nov 17, 2019 8:52 pm

I remember reading here that it was not against boglehead philosophy to have a small play portfolio. In any case, I decided to download stock market sim from the apple App Store which will allow me to “play the market” for free with my picks. Let’s see how I do. Maybe this will cure the itch,

averagedude
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Re: Increasing risk appetite

Post by averagedude » Sun Nov 17, 2019 9:01 pm

am wrote:
Sun Nov 17, 2019 8:52 pm
I remember reading here that it was not against boglehead philosophy to have a small play portfolio. In any case, I decided to download stock market sim from the apple App Store which will allow me to “play the market” for free with my picks. Let’s see how I do. Maybe this will cure the itch,
OP, this is a good idea. The last couple years I have been playing a stock market game on Investopedia. Turns out I suck at beating the market, but it hasn't cost me a dime. My ego is still intact, because most active management can't beat the market either.

RubyTuesday
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Re: Increasing risk appetite

Post by RubyTuesday » Sun Nov 17, 2019 9:08 pm

First, why out of bonds? Seems like risky assets should be used for risky endeavors. Second, withdraw the cash and buy into the World Series of Poker. That would actually be fun. Playing the market isn’t my idea of fun.

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dwickenh
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Re: Increasing risk appetite

Post by dwickenh » Sun Nov 17, 2019 9:17 pm

I do this all the time with pretend 500,000 portfolios on Morningstar. I pretend I am good at stock picking, pretend I have the kahunas to invest 500,000 into my Stock picks, and watch them on Morningstar for 2-3 years. That scratches the itch and tells me that I am making more by buying the diversified market with my 3 fund real portfolio. Even if I beat the market for 2-3 years, it would definitely be luck.

Good luck if you try it with real money!

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

McGilicutty
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Re: Increasing risk appetite

Post by McGilicutty » Sun Nov 17, 2019 9:36 pm

am wrote:
Sun Nov 17, 2019 12:20 pm
I am a diehard 3 funder since 2007. Have done well by hanging out on BH, bull market and high income. Anticipate basic financial independence early 50s assuming no big bear or other negative event.

Of late my desire to “play the markets” has increased.I want to let a small % run on risky strategies. Cash in say 20k of bond fund in 401k And let it run on Hedgefundies leveraged strategy. Another 10k or so on a portfolio of risky etfs and stocks I have been following for years.

Is this reasonable? Anyone else do something like this? How did it turn out and did you hang on for long?
I've had 5% to 10% of my port in individual stocks for a few years now. I started off buying Tesla at around $200 and sold it around $360 after Musk wrote a tweet about going private for $420. I've also had a few other winners - Nvidia, Intuitive Surgical. This year, I realized a $3K loss in Twilio and have about broken even in what has been quite a bull year for the S&P 500. Luckily, that is what the rest of my port is in. Most of my stock picks I get from the Motley Fool.

I currently own 4 individual stocks - ROKU, MDB, AYX, and TTD. These are some very volatile stocks and can go up or down more than 5% in a day. I think it was just last month that ROKU reported earnings and went down something like 20% in one day. Since then it has recovered and has been powering higher lately. It's a lot of fun when the momo stocks are on fire and you see that small portion of your port going up like 3% to 5% in a day.

Most Bogleheaders will tell you to stay away from individual stocks. They tend to think it will be a disaster, but it doesn't have to be. Maybe you'll underperform by a little or outperform by a little. Maybe you'll pick the next Amazon and hit the proverbial lottery. In any event, it's unlikely to be a disaster if you just take a small portion of your portfolio to do it. I say go for it and scratch that itch.

I'll also add that I like to go to the casino and play blackjack even though I know I'm likely to lose. It's a form of entertainment for me. I have the gambling bug and that 5% to 10% of my port that I keep in individual stocks is just an extension of that. I also don't own any bonds because at 2% yield, what is the point?

Good luck in whatever you decide.

tranquility
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Re: Increasing risk appetite

Post by tranquility » Sun Nov 17, 2019 10:19 pm

My suggestion would be to invest using "play money" first before moving to a % allocation of your portfolio. This way you get comfortable with your new higher risk investment strategy first before committing to it in your investment portfolio. "play money" in my mind is something you don't mind losing (and don't lose sleep over it) and I don't typically include it in my overall portfolio.

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