Hi guys, I just realized I should update you in an original comment about what has changed with me over the past few weeks... well basically, I think I grew out of that phase that I was in! Hahaha... or at least, I think that I'm coming to understand just how volatile some stocks are, and how some can go "poof" into thin air... for example, one stock, Rite Aid, that I was thinking of investing in a while ago because of it's insane recent growth, went literally 25% down the DAY that I had planned to invest in it! When that happened, it kind of shook me, but in a good way... I thought to myself, oh my god, if I had put in my money in there, I would have lost a quarter of it, in one single day... this happened with a few other stocks that I was observing over the course of the past month or so, and each time some stock I was looking at went down, it made me realize just a little bit more how investing in stocks is really, truly a volatile game in the long run.
So... I did some thinking (!) and I decided actually, to invest 10k into this ETF: XLK! I decided to invest in that ETF because my friend who worked on wall street looked into that ETF a bit for me and told me essentially that it was "more risky than an S&P 500 ETF, but that if I was ok with taking a little bit extra risk to get a little bit extra potential gains, that I should go for it", and well, I went for it, haha... I think actually, that this ETF is really a fairly safe investment right now in 2020... would I be wrong to assume that? This ETF looks like its outperformed the S&P 500 consistently for many years now, and the expense ratio is super low (just 0.13%)... oh, for those who don't know, this ETF is just one of the popular ETF's tracking specifically the technology sector of the market.
So I invested 10k into this ETF about 10 days ago and it's made about $200... so now, I'm almost up a grand in total (before taxes haha) since investing in those individual stocks.
So now, for anyone who's reading, my portfolio is:
AMD - 30 shares
Apple - 5 shares
Shopify - 4 shares
Microsoft - 10 shares
Nvidia - 6 shares
XLK (the Tech ETF) - 100 shares
Ok... so this brings me to my next point... I know that you guys might not approve of this sort of thing, but I've been looking at leveraged ETFs, and I've been reading a lot about them... I am now 80% of the opinion that I do not want to chase individual stocks, since I saw what happened to those other stocks I've been tracking over the past month... now, I am thinking more about investing into leveraged ETFs... now I know that this opinion may not be popular here, but just hear me out, and if you still have to shoot down my dreams afterwards, then go ahead, I can take it, hahaha...
This is my plan - I know that leveraged ETFs track various sectors at a 2x or 3x exaggeration... and also that leveraged ETFs "reset" on a DAILY basis... and also that leveraged ETFs have the possibility of getting completely wiped out if whatever sector it's tracking dips 50% or 33% in a day (for 2x and 3x leveraged ETFs, respectively) - but just hear me out - I also know about stop losses, and I was thinking about investing in leveraged ETFs with added stop losses. So this is what I was thinking - I'm going to use the leveraged ETF "TQQQ" as an example for this (this is a 3x leveraged ETF that tracks the Nasdaq)... looking at TQQQ, it hasn't gotten completely wiped out (or even close to completely wiped out) at any point in it's entire history, so as to the argument that you should not invest in leveraged ETFs because they can completely wipe out your investment, in this case I am more than OK with taking this risk, as TQQQ hasn't even come close to getting wiped out since it began in 2010.
There is another argument I have come across as a reason not to touch leveraged ETFs - being that although the gains are amplified 3x, the losses are as well. Now this is where I am thinking (very much in beta phase of this plan, by no means final) of using stop losses - I plan to do something to the effect of including a stop loss in my order that I can update on a daily basis, which TRAILS a certain percentage underneath the CURRENT price of TQQQ, at all times. How high or low that percentage is can be determined simply by my appetite for risk - just starting out, I am sure I would not want it to be above 5%, as I am not sure I could stomach a loss of 5% in a single DAY yet... but perhaps, maybe after a few months of seeing my money go up and down wildly, I would be able to stomach it.
Now the way that I see this unfolding is as follows - TQQQ has, by default, more or less mimicked QQQ (the non-leveraged Nasdaq ETF) simply by a factor of 3x - that is to say, over long periods of time, TQQQ is just as likely to yield positive gains as QQQ is (unless I'm missing something). Using stop losses with TQQQ seems like it would be a very safe bet to me... hell, I could even go safer and just do an S&P 500 3x leveraged ETF (because the S&P 500 is less volatile than the Nasdaq if I'm correct), also with stop losses that trail just below the current price.
Phew! Man it's hard to explain these things... hopefully I've done a good job and you all can understand me. But yea... so if my plan is totally filled with holes in it that I didn't see, I'm all ears, hahaha...
And just wanted to say guys thanks so much for all your help and insight with this, it is really awesome to find communities like this... hope you're all having a great day!!