As I said a month ago, I started investing in the stock market. Unfortunately (1) I chose exactly the moment the market started tanking, and (2) I'm stuck with a rule that says I can't sell an equity unless I've owned it for a month.
So... the good news is that I finally started to reduce my losses. Indeed, today, when the markets were down about 5%, I "only" lost 2%. The strategy I took was to complement some of the stocks with hedges, these being:
- Gold. Which didn't help today, but it's helped the last couple of weeks
- DOG, an ETF that negatively tracks the Dow. This is a safe way to "short" an index, you risk only the money you spent on the ETF. Indeed, for shits and giggles I set up a watch list where I pretended to sink an equal amount of money in an oil futures ETF, and an ETF that shorts it, and found that... I would have made money had I done it for real. Not a lot of money, but, well, money is money.
- SPXU, an ETF that "ultrashorts" the S&P. An ultrashort ETF is similar to the above, but tries strategies that will double the effect. I bought very little of this, very late in the day (ie, the day before yesterday), and as a result it hasn't done a great deal yet.
Still, I've lost about 5% total on my portfolio since I started, and I'm not happy about that. Main problems:
- CSX - nothing about this stock should be negative, and yet I've lost about 15% on it since I bought it. I don't understand why. They've had nothing but good news.
- CIM - I bought this because it was high dividend. I can understand why confidence in the associated industry might be low, although it's still paying very decent dividends (and the company itself has good fundamentals.) This was one of my more dubious decisions, and I knew that going in, so I'm not going to get upset about it. I've lost about 15% on that too, which is a shame because that pretty much matches the yearly dividend.
I added a bunch of positions at the beginning of the week, notably a small-cap oil/gas company that operates within the US, and a chocolate maker. Both have lost value but so has everyone so...
Advice? If you're stuck with stock like I am, hedge.
If you're not, don't buy right now.
My next big experiment will probably be with options. But I'm going to avoid pumping in more money until I know where the market is going.