Monday, June 7, 2010

How I'm Investing Now

I have a friend who is a fellow stock market junkie who, on the May 6th market plunge had one comment - "Roller coaster, baby"!  (Sorry, dude, if you are reading this!).  In other words, the volatility in the market was an opportunity to trade to trade the dips.

I took the plunge in a different way.  For me, it was not a signal for "roller coaster", but for "mine shaft elevator" way down.  There may be blips up along the way, but that does not make those blips tradeable.

The last month has proven me right, and my dear friend wrong (again, sorry dude). Every trading day since May 6th I have made out a buy list.  And every day, either the volatility or a drop has signalled to me- no buy.

You are now doubt experiencing a similar angst.  I can't tell you how to deal with this market.  I can only share how I am coping.

For my brokerage accounts, which are pure dividend portfolios, I haven't sold.  Brokerage #1 is invested in tax-free muni CEFs, and Brokerage #2 is invested in 15% low-beta tax-advantaged issues.  Brokerage #1 is reduced in capital appreciation, but only slightly.  Brokerage #2 is actually increased in value.  I will take advantage of the market drop and continue to reinvest and DCA.

For my IRA, which employs a mixed capital appreciation and dividend strategy, I am currently in 50% cash.  This has kept me within a 7% stop loss from my portfolio high, which beats the current market drop of 13%.  I have re-swizzled and sold off more volatile issues, and plowed more into stable preferreds (MHRpC, EIFZF, CHSCP).  

I am, for now, giving up on taking new positions in common stocks.  Instead, I am have placed GTC (Good Until Cancelled) orders on more stable, low beta preferreds.  I am placing the purchase price within 10% of their historic low.  

By employing GTC orders I can step back from the market chaos.  I can relax and know if an order is triggered the stock will not significantly depreciate.  I can also be paid a handsome dividend at minimal risk.

My GTC orders for my IRA are:

EDT for $26.80
BBTpB for $27.00
DRU for $26.90
TLT for $91.00
SYBTP for $11.50
GDLpA for $53.25